Most plausible medium-term scenario: Mad Max

by Paul Craig Roberts Global Research, August 3, 2010 It was 2017.  Clans were governing America.   The first clans organized around local police forces. The conservatives’ war on crime during the late 20th century and the Bush/Obama war on terror during the first decade of the 21st century had resulted in the police becoming militarized and unaccountable. As society broke down, the police became warlords. The state police broke apart, and the officers were subsumed into the local forces of their communities. The newly formed tribes expanded to encompass the relatives and friends of the police. The dollar had collapsed as world reserve currency in 2012 when the worsening economic depression made it clear to Washington’s creditors that the federal budget deficit was too large to be financed except by the printing of money. With the dollar’s demise, import prices skyrocketed. As Americans were unable to afford foreign-made goods, the transnational corporations that were producing offshore for US markets were bankrupted, further eroding the government’s revenue base. The government was forced to print money in order to pay its bills, causing domestic prices to rise rapidly. Faced with hyperinflation, Washington took recourse in terminating Social Security and Medicare and followed up by confiscating the remnants of private pensions. This provided a one-year respite, but with no more resources to confiscate, money creation and hyperinflation resumed. Organized food deliveries broke down when the government fought hyperinflation with fixed prices and the mandate that all purchases and sales had to be in US paper currency. Unwilling to trade appreciating goods for depreciating paper, goods disappeared from stores. Washington responded as Lenin had done during the “war communism” period of Soviet history. The government sent troops to confiscate goods for distribution in kind to the population. This was a temporary stop-gap until existing stocks were depleted, as future production was discouraged. Much of the confiscated stocks became the property of the troops who seized the goods. Goods reappeared in markets under the protection of local warlords. Transactions were conducted in barter and in gold, silver, and copper coins. Other clans organized around families and individuals who possessed stocks of food, bullion, guns and ammunition. Uneasy alliances formed to balance differences in clan strengths. Betrayals quickly made loyalty a necessary trait for survival. Large scale food and other production broke down as local militias taxed distribution as goods moved across local territories.  Washington seized domestic oil production and refineries, but much of the government’s gasoline was paid for safe passage across clan territories. Most of the troops in Washington’s overseas bases were abandoned. As their resource stocks were drawn down, the abandoned soldiers were forced into alliances with those with whom they had been fighting. Washington found it increasingly difficult to maintain itself. As it lost control over the country, Washington was less able to secure supplies from abroad as tribute from those Washington threatened with nuclear attack. Gradually other nuclear powers realized that the only target in America wasWashington.  The more astute saw the writing on the wall and slipped away from the former capital city. When Rome began her empire, Rome’s currency consisted of gold and silver coinage. Rome was well organized with efficient institutions and the ability to supply troops in the field so that campaigns could continue indefinitely, a monopoly in the world of Rome’s time.   When hubris sent America in pursuit of overseas empire, the venture coincided with the offshoring of American manufacturing, industrial, and professional service jobs and the corresponding erosion of the government’s tax base, with the advent of massive budget and trade deficits, with the erosion of the fiat paper currency’s value, and with America’s dependence on foreign creditors and puppet rulers. The Roman Empire lasted for centuries. The American one collapsed overnight. Rome’s corruption became the strength of her enemies, and the Western Empire was overrun. America’s collapse occurred when government ceased to represent the people and became the instrument of a private oligarchy. Decisions were made in behalf of short-term profits for the few at the expense of unmanageable liabilities for the many. Overwhelmed by liabilities, the government collapsed. Globalism had run its course. Life reformed on a local basis. Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury.  His latest book, HOW THE ECONOMY WAS LOST, has just been published by CounterPunch/AK Press. He can be reached at: PaulCraigRoberts@yahoo.com

Paul Craig Roberts is a frequent contributor to Global Research.  Global Research Articles by Paul Craig Roberts

Is the End Game Hyperinflation or Debt Implosion?

Must read of the day, to keep impressed in your mind, By W Lorimer Wilson | FinancialSense.com | Aug. 2, 2010

“The collapse of the U.S. economy is a certainty - only the manner in which it will happen has yet to be determined. It is just a matter of time before the global derivatives bubble will produce the same result that has occurred to every other currency not backed by gold throughout history - those currencies, our ‘money’, will become worthless.”

Those were the alarming words of Jeff Nielson of BullionBullsCanada.com in a recent speech* which has been edited and reformatted below (with his permission) for the sake of brevity and clarity.

Derivatives: An Unregulated One Quadrillion Dollar Market

“Warren Buffett once described derivatives as ‘financial weapons of mass destruction’ - and for a very good reason. While U.S. ‘unfunded liabilities’ are larger than the entire global economy, the derivatives market is 20 times larger than the entire global economy – at an astonishing $1 quadrillion. Yes, you heard me correctly - $1 quadrillion!And get this - this derivative market is totally unregulated. It is totally lacking in transparency, meaning that all we know about this $1 quadrillion mountain of banker-paper is what the bankers tell us.”

Nielson pointed out that “During the 2008 U.S. financial crisis, the Wall Street banks required $10 trillion in loans, hand outs and guarantees just to temporarily prevent their bankruptcy – more than all other bail-outs for all the rest of the world, for all of history, combined - and the entire crisis was based upon settling the derivatives positions of just one Wall Street investment bank, namely, Lehman Brothers - and even that $10 trillion was not enough to prevent the collapse of the U.S. financial sector.”

Furthermore, “The Wall Street banks also needed to have the U.S. accounting rules changed, so that they could assign their own ‘fantasy valuations’ to the debts/assets on their books, instead of the actual market value of those assets” said Nielson. “Without those most radical accounting changes in history the Wall Street banks would have been reporting their own bankruptcies rather than reporting their supposed ‘record’ profits.”

All Is NOT As It Seems

Nielson went on to say that “While the Wall Street banks brag about billions in supposed profits, there are still trillions of dollars of toxic assets being hidden off their balance sheets. We know there has been no increase in the real value of these ‘assets’ because, in just 2 years, the average amount of losses on their books has increased 5-fold relative to the value of their assets when the first bank failures occurred. Thus, if anything, these ‘toxic assets’ are even more worthless than they were when the collapse began.

Despite this huge mountain of unstable debt, Wall Street has actually increased the size of the derivatives bubble by 30% since the U.S. housing-bubble first burst. This caused Neil Barofsky, the U.S. ‘watch-dog’ assigned to oversee the TARP bail-out, to exclaim recently that the risk of collapse of the entire U.S. financial sector has increased not decreased saying:

“Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding road, but this time in a faster car.”

A Serious Dilemma Faces Investors

“As I see it,” said Nielson, “there is no solution for the U.S.’s economic problems. “With U.S. hyperinflation likely, but a deflationary collapse still possible, this not only creates a frightening scenario for us to face as individuals, but a serious dilemma for investors. Do we prepare for deflation, or hyperinflation – or, is it possible to prepare for both?” 

“Such a defensive investment philosophy is called wealth preservation and, in my opinion,’ said Nielson, “investors need precious metals components, i.e. ‘good money’, in their portfolios because they are ‘currencies’ that cannot be diluted through inflation or destroyed by imploding debt.”

Why the Need for ‘Good Money’?

Nielson pointed out that, while paper ‘money’ is both uniform and evenly divisible, it is neither rare nor precious and that the paper it is printed on has no intrinsic or aesthetic value compared to precious metals., reminding his audience that “In less than the 100 years that the Federal Reserve has existed, the U.S. dollar has lost approximately 97% of its purchasing power.”

It important to understand the above properties of ‘good money’ said Nielson “because, contrary to the economic propaganda from the mainstream media, the events of today are unparalleled in history.”  He then conveyed that:

- more countries are carrying debts than at any time in history

- the aggregate size of these debts are more than ten times greater than at any other time in history

- the whole world is off a “gold standard” for the first time in history – meaning there is nothing backing all these mountains of debt.

What Happens to Money During a Deflationary Implosion or a Hyperinflationary Scenario?

a) Hyperinflationary Scenario

“Gold and silver have always retained 100% of their value in past hyperinflationary environment while paper money has gone to zero” maintained Nielson.

b) Deflationary Scenario

Nielson believes the circumstances surrounding a potential deflationary collapse are unique this time round in that we are not talking about a “recession” or even a “depression” but, instead, about entire nations effectively going bankrupt and defaulting on their massive debts claiming that “with none of the world’s currencies backed by anything, paper “money” is now essentially nothing but the unsecured IOUs of the governments issuing those currencies. As such, he postulated that:

1. were such governments to default then billions (trillions?) of dollars of government bonds would have very “questionable” value – if not become totally worthless

2. were government bonds to become worthless, then the paper currencies of those governments would also become worthless

3. were government bonds to become worthless, then the government would have no ability to borrow any money to fund government spending – and would have no choice but to simply print unlimited amounts of un-backed paper money that would be nothing more than unsecured IOUs. Nielson conclude the aforementioned with the question: “What is the value of an IOU from a debtor who has already defaulted on his debts? The answer is: zero.”

Summary

Nielson explained that “Where a deflationary implosion differs from hyperinflation is that in such an implosion all asset-prices become severely depressed and most people are more likely to move to cash because of its supposed buying power. Eventually, however, in either scenario, paper currencies would go to zero.”

Conclusion

He concluded his remarks with the following advice: “You need to hold ‘good money’ and the ultimate ‘stores of value’ -  the only “good money” -  is gold and silver  and thus the best protection from the events that lie ahead.”

Source: Bullion Bull Scanada

Drone mass-assassinations bring bad karma on the troops deployed

The geniuses running the show in AfPak took 10 years to figure this out:

From the HuffingtonPost: 

WASHINGTON — Each time U.S. or NATO forces accidentally kill Afghan civilians, insurgents and their sympathizers typically retaliate with six additional assaults on foreign forces over the next six weeks, researchers using newly declassified NATO data conclude.


A new study published by the National Bureau of Economic Research supports the prevailing view of counterinsurgency strategists who believe civilian casualties help Taliban recruiting drives. The study found that attacks on foreign forces increase slightly even when the insurgents are to blame for the deaths of non-combatants.


"Our results show that if counterinsurgent forces in Afghanistan wish to minimize insurgent recruitment, they must minimize harm to civilians despite the greater risk this entails," says the study, to be released Tuesday through the Washington-based New America Foundation.
The principle that protecting civilians is the key to sidelining and ultimately defeating an insurgency is the heart of the strategy outlined by Gen. David Petraeus in Iraq and adapted for Afghanistan. As applied by the former U.S. commander in Afghanistan, Gen. Stanley McChrystal, the strategy includes strict limits on U.S. air strikes and firepower.


Petraeus, who took over from McChrystal last month, is tweaking those rules but has said he will not lift them outright. Petraeus told Congress last month that he remains convinced that heavy-handed tactics do more long-term harm than good.


Petraeus published a new manifesto on counterinsurgency Sunday that drives home that point.
"The people are the center of gravity," Petraeus wrote in a memo to his troops. "Only by providing them security and earning their trust and confidence can the Afghan government and ISAF prevail."


The new independent study uses freshly declassified data about civilian deaths and injuries and "significant actions" by insurgents in Afghanistan. It analyzes attacks and deaths by district across the country.


The study is titled "The effect of Civilian Casualties in Afghanistan and Iraq" but focuses mainly on Afghanistan, where the Taliban-led insurgency has surged back from near extinction and now controls key territory.
The report examines data from the International Security Assistance Force, or ISAF, from January 2009 through March 2010. These data cover 4,077 civilian casualties from 2,118 incidents.


The study found that the link between civilian casualties and insurgent attacks also works in reverse.
If ISAF forces can avoid two incidents in which they kill or injure civilians, they can expect one fewer violent incident over the next six weeks, the report found.


The report found no such link in Iraq.
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Related: Poll: Waning support for Obama on wars

"If the dollar were to fail at 71, I would suggest that it's time to start stockpiling food, ammo, propane and precious metals, if you have not begun to do so already."

From The Golden Truth:

I have to say, moving away from the large August gold contract "roll" period/options expiry and moving into the traditional period of seasonally strong buying in India, that gold/silver fundamentally and technically looks very bullish.  Here is a bit of useful color from today's "JB" commentary in LeMet's Midas report:  

The Istanbul Gold Exchange has reported Turkey’s July gold imports as 19.929 tonnes, 39.1% above last July and the largest quantity since September 2008...The Istanbul Gold Exchange has reported Turkey’s July gold imports as 19.929 tonnes, 39.1% above last July and the largest quantity since September 2008

Indian premiums overnight were also quite robust.  Clearly the gold-buying world has aptly adjusted to the idea of paying $1200/ounce for deliverable gold.  Again, the key to understanding this next phase of the gold/silver bull is to understand the dynamics of the physical market.  This is why dopes like Dennis Gartman will make incessant asses of themselves as they pontificate sweet nothings about the precious metals market.

Here's some charts:

The U.S. dollar chart looks like it has contracted HIV.   I'm sure it is reflecting the anticipation of whatever impending QE program Bernanke is getting ready to unveil.  I personally believe that we'll see a "shock and awe" number - like something north of $2 trillion.  Remember the ECB announced a $1 trillion program.  The U.S. financial condition is easily more than two times worse than that of the EU.  And the U.S. economy - contrary to the stinky excrement coming out of Bernanke's mouth today, is falling off of a cliff.  Here's the chart: 

The dollar needs to hold at the 80 level and rally from there, or it is going to test the 2008 lows at the 71-ish level.  If the dollar were to fail at 71, I would suggest that it's time to start stockpiling food, ammo, propane and precious metals, if you have not begun to do so already.  I'm serious about that.

Here is the utterly idiotic garbage put forth by Bernanke today at some southern redneck legislative symposium: "[T]he household sector, growth in real consumer spending seems likely to pick up in coming quarters from its recent modest pace, supported by gains in income and improving credit conditions."  Here's the link:  Bernanke: Insane or Stupid?.  Now, compare Bernanke's crapola to reality, in which "[m]ore than two-thirds of the nation's 3,141 counties, and 37 of 50 states, endured more hardship in June than in May, the AP's Economic Stress Index shows"  Link.   That's real data that reflects the true condition of the U.S. economy. 

Can someone explain to me from which sewer Bernanke is sourcing his views?  He also made an appeal to the States to build up "rainy" day slush funds.  Excuse me?  Nearly every State out there is running massive deficits, the bulk of which are being "doctored" with questionable accounting and the looting of State pension funds.  How the hell does Bernanke propose that the individual States save money?  Colorado has a balanced budget requirement and will probably fall at least $200 million under budget this year.  California/Illinois/New York/Texas - fuggedaboudit. 

Someone must have shoved that ivory tower, the one at Princeton which used to encase Bernanke's head, pretty far up Bernanke's ass because he sure made an ass out of himself with that speech.

First Signs of (Revolutionary) War in the US? Sheriff Tony DeMeo Threatens Force Against Federal Agents from Bureau of Land Mgmt

This may evolve in something interesting, from Vaticproject:


http://wellregulatedamericanmilitias.com/video/first-signs-of-civil-war-in
August 1, 2010, Terminator Girl, Provided to Vatic Project by Anonymous, USA
Anonymous Note: Just got this from a friend. Looks like some lines are being drawn. Somehow, I get the feeling that if the Feds go after this sheriff it won't be the same as burning down a church filled with women and children. Nope!!! WOW.. Look at what this sheriff did!! M.
Part 1 of 3 - http://www.youtube.com/watch?v=JaEKB8pU2Tw&feature=related

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Video 2 of 3 - http://www.youtube.com/watch?v=QdpOT7wR-wU&feature=related

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Video 3 of 3 - http://www.youtube.com/watch?v=W2lVI6gzsVM&feature=related

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It appears that Sheriff Mack is making an impact with sheriffs around the country. 

Get past the introduction ... http://sheriffmack.com/

It began with one Sheriff speaking with other Sheriffs about their oaths to uphold the constitution. A new movement is growing in this country in support of limited government, constitutional principles, states rights and a stronger role for sheriffs to play against federal abuse of power. In this 3-part video interview with Tony DeMeo, Sheriff of Nye County, Nevada, he explains that he is a Constitutional Sheriff and that authority for public office holders is derived from the people:http://www.infowars.com/constitutiona...

In his own words Sheriff Tony DeMeo describes an incident where federal agents of the BLM threaten him with arrest while the Sheriff issues his own threats of an armed response if illegal seizures of private property in his county continue. Imagine if BLM authorities went ahead with their "normal" operations of seizing cattle found on public property in direct opposition to Sheriff Tony DeMeo warnings? We would witness a standoff with dire consequences. Sounds a little like Wyomings warning to Feds about gun rights in their state!
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Related: CNSNews.com - Arizona Sheriff: "Our Own Government Has Become Our Enemy"