Fear that U.S. could grab nuclear arsenal heightens Pakistani anger

By Yochi J. Dreazen
National Journal

Last week's U.S. raid into Pakistan is fueling one of the country's most enduring—and potentially dangerous—conspiracy theories: that the U.S. has designs on Pakistan's arsenal nuclear and is prepared to send highly trained commandos into the country to seize control of the weapons.

The pervasive Pakistani belief that the U.S. would be willing and able to effectively steal the country's nuclear weapons helps explain Islamabad's surprisingly aggressive official response to the Navy SEAL assault that killed Osama bin Laden, the world's most wanted terrorist.

Gen. Ashfaq Kayani, the head of Pakistan's armed forces, released a blistering public statement late last week condemning the U.S. assault and warning that he would order his troops to use armed force against any American troops who entered Pakistan in the future in pursuit of other wanted militants.

Kayani's statement also made explicit reference to his country's nuclear arsenal, which he promised to fully defend against any potential American-led efforts to take control of the weapons.

"As regards the possibility of similar hostile action against our strategic assets, the [Pakistani military] reaffirmed that, unlike an undefended civilian compound, our strategic assets are well protected and an elaborate defensive mechanism is in place," Kayani said in a statement put out by the military's official press office.

The remarks stunned and angered many senior Obama administration officials, who had expected Pakistan to apologize for the pervasive intelligence failures that allowed bin Laden to spend five years living in an affluent Islamabad suburb under the nose of thousands of Pakistani security officials. American officials also thought Pakistan would quickly ramp up its intelligence sharing about the whereabouts of bin Laden's likely successor, Ayman al-Zawahiri, as part of a package of conciliatory gestures toward Washington, where anti-Pakistani sentiment is running at a fever pitch. Democratic Sen. Carl Levin of Michigan, the chairman of the Senate Armed Services Committee, said his staff would investigate whether elements of Pakistan's government, military, or intelligence service knew bin Laden was in their country or helped shelter him.....read on

U.S. Economy - The Big Picture

By Monty Guild:

"That's another fine mess you've gotten me into." Early cinema comedian Oliver Hardy, of Laurel and Hardy fame

A mess by all accounts-and seemingly getting messier.

As we have been saying for some time, U.S. economic growth is stuck in the slow lane. Very slow lane. There are few signs of any significant lane changing ahead.

We have seen a serious slide in the American standard of living over the past three years, since the beginning of the recession. The slide can be measured in many ways. Food stamps recipients have increased by 48 percent and the cost of the program ballooned by 80 percent. Medicaid recipients are up 17 percent and program costs are up 36 percent. Welfare recipients are up 18 percent, and program costs up 24 percent. That isn't the kind of growth that's good for any economy!

Looking ahead, we expect the standard of living decline to continue for up to another seventeen years. Our economy and society are substantially changed, but the change to date is moderate compared to the magnitude of change ahead. In 2018, the U.S. will be a much poorer country than it was in 2008.

We envision the average family spending a higher percentage of income on food and shelter. People will retire at 75 years of age...not 65. Many may not be able to retire. Many retirees will have to re-enter the work force as their savings and pensions are diminished in buying power. The streets will be filled with more poor and homeless. The dollar will continue its decline. Gold and other commodities will continue to rise in price. All of these are symptoms of a decline in the public's standard of living. Unfortunately, we expect it to last for quite a while.

If it is any solace, the U.S. does not stand alone in the economic muck. Japan has been going through the doldrums for almost twenty years now and that sorry state of affairs will likely continue for another decade. Europe's standard of living is moving in lockstep with the U.S. We give the Europeans, like the U.S., a poor seventeen year prognosis. To us, it looks like the developed world is 'un-developing." By 2020, expect to see a more humble developed world, viewing itself differently, playing a lesser leadership role, and having a vastly different view of the use of debt to create prosperity in society.

Labor in the Big Picture

The U.S. has big problems on this front. The country needs to employ more than 2 million new workforce entrants every year. Plus, there are millions who lost jobs in the last three years who still need to be rehired. How does the U.S. deal with challenges like this in a situation of slowing economic growth? The reality is a very difficult employment outlook for current and future U.S.-born workers, especially those with minimal education and skills, and for immigrants with inadequate English fluency.

Conversely, the jobscape looks brighter for the educated and skilled, especially individuals in the fields of computer science, electronic engineering, mathematics, geology, energy science, and oil field engineering. The job market also appears better for individuals in some low-paying retail jobs and other service industries who demonstrate good attitudes and a willingness to work.

The U.S. employment picture is changing and it has become necessary for the labor force to have higher skill and education levels in order to compete. The U.S. still has a comparative advantage over other countries in areas involving technology and skilled labor. The construction jobs that kept so many laborers working for the past two decades are gone. We don't see them returning for many years. Moreover, there is little unfilled demand for factory workers at high salaries and government employees who receive secure pay and rising benefits.

What can our erstwhile politicians do for us? Other than utter the usual platitudes, don't expect much. For them, the big picture isn't rosey at all. If employment growth is a key to getting re-elected, the boys and girls in Congress are in difficult straits. When the job situation does not improve, expect them to hit the panic button in late 2011. Their anxiety will generate interest in extending unemployment benefits along with food supplement and other social programs. All intended, of course, to encourage voters to view them more favorably. But, in the process, will run up more debt.

The Big Picture - The Risk of Big Government Statism

History has shown that it takes at least a decade for a country to get back on its feet again after defaulting on its debts or losing its reserve currency status. Washington appears oblivious to this huge and looming risk. We suggest policymakers consider what happened to Argentina as an example of how to destroy a country's standard of living. The Peronists in Argentina took a once-proud country and have driven it to its knees. When they could find no buyers for their government debt their crowning stupidity was forcing pension funds to buy government bonds. They have stooped to highly destructive measures that will be felt for a long time in order to delay a day of reckoning by a short time . This is what irresponsible politicians do.

Look for similar events to occur in the U.S. and in Europe. Specifically, there is a very large risk that the U.S. will engage in programs such as making citizens and pensions buy government bonds, or legally forcing U.S. residents to turn in their gold, as was the case during the Great Depression of the 1930s. There are other tactics they can employ that will result in bigger government and bureaucrats within government agencies usurping legislative power from the legislative branch. Such things are already happening.

Fortunately, the public is starting to resist such behavior. We predict an intensifying battle ahead for control of public opinion by big government and small government advocates. But unfortunately, close to half of the population either pays no federal income tax or gets more assistance from the federal government than they pay in taxes. That's hardly a formula for survival. It's more like a forumla for collapse.

The latest U.S. Treasury data (2008) from about 140 million income tax returns exposes the progressive nature of the tax system. The argument that the rich do not pay their fair share has serious flaws. In 2008, the top 1 percent earners paid 38 percent of total federal individual income taxes. The top 5 percent paid over 58 perecent of the total. About 52 million filers paid no federal income tax and many millions more did not even file a tax return.

Summarizing The Big Picture

The U.S. and European standard of living will fall in the coming years, and perhaps for two decades. We are only three years into the decline. Government officials will try to slow the decline by depreciating their currencies to improve exports. This is already causing oil, gold, and foreign investments to rise in U.S. dollar terms and these trends will continue.

Here and in Europe, government bonds will be harder to sell. The search for revenues and a desire to shrink deficits will prod governments into cutting defense and social expenditures, as well as raise taxes. In the U.S., earners in the top 10 percent (those with incomes of about $113,000 and up) will bear the brunt of the increases. The top 3 percent of U.S. earners currently pays more than half of U.S. individual income taxes. This situation will eventually cause many high-income earners to leave the U.S. and seek to earn or invest their money abroad, thereby further decreasing the tax base of the country.

The wealth of the nation will fall. Investors should protect themselves. It is not too late. Please check our archives and you will see that many current economic and social events seen in the world today were predicted in our pages well in advance, including the banking crisis of 2008, the derivatives crisis in the world banking system, the fall of the U.S. dollar the rise of gold, oil, and many other important events. If you listened to us before, you have benefitted. Refer to our archives to see our calls and listen to us now.

With So Much Economic "Slack," Where is Inflation Coming From?

It's a combination of key factors:

U.S. money supply growth. Money supply and credit growth in Europe, Japan, Russia, China, India, Brazil, and other countries in the emerging world.

These factors are rapidly adding liquidity to the global financial system. The liquidity is finding its way into asset and commodity prices. This has been our long-term view.

Credit growth in the emerging world is a big reason why prices are rising, and one that does not get enough press. Money supply growth alone without the credit growth would not create inflation. The developed world banking system is weak. Loan creation isn't happening. But credit growth is booming in the developing world, especially Brazil, India, and China.

These dynamics explain why inflation is now booming in the developed world. We have been saying for some time that inflation would first arrive in the emerging markets and then migrate to the developed world. This has happened.

Our next prediction in this string of events is that QE3 will take place in order to combat the slack in the U.S. job market. Any delay would slow down economic growth and employment. With an election approaching, you can bet there will be strong pressure from politicians for QE3.

While we are in a predictive mood, we'll add that investors, seeing more QE (and more government), will send the price of U.S government bonds lower, and currency markets will continue to mark down the value of the U.S. dollar. This will create a downward spiral of declining dollar and bonds as people around the globe reduce their exposure in favor of investments such as those in our recommendations. You will witness a continuing vicious cycle until Washington decides to tighten the belt substantially and decrease its budget deficit. Only with a real commitment to fiscal discipline that becomes obvious to the markets can the dollar stabilize and U.S. government bonds once again be considered a genuine store of value for investors.

Sign of the times:

The International Monetary Fund predicts that China will surpass the U.S. as the world's largest economy by 2016.

Dollar Weaknesses Expected To Continue

By Bob Chapman:

Dollar weakness that has continued will continue. That is to make US goods cheaper and more saleable as exports, but the flip side is that imported goods are more expensive and that creates inflation. Such a policy is foolhardy versus foreign nations that have export advantages. Besides the US does not have the predominance of mass to compete on this level. If tariffs on goods and services were implemented that would be another story. That accompanied by a change in tax laws for transnational corporations, that would force them to return the $2 trillion they have offshore and pay normal taxation which would be very beneficial to solve tax, production and employment problems. Remember, we have lost about 9 million jobs over the past 11 years, as well as 440,000 businesses due to free trade, globalization, offshoring and outsourcing. Tariffs would level the playing field and leave no advantage to cheapening one’s currency, because it would be accounted for in their tariff structure. Having lost our export markets we have a jobless recovery that can never improve, nor can our balance of payments deficit and our increasing debt cause not only falling revenues, but falling job creation. This is just another artifice to try to stave off the inevitable. Lowering the dollar is not the answer. Having a level playing field is the answer.

Price fixing is an exercise in futility and so is a course of mandatory wage increases pursued to play catch up with runaway inflation. Even though higher numbers show sales growth they are misleading and only a reflection of higher pressing inflation. This is not economic growth; it is price inflation. Such an exercise is geared to keep people and business solvent, but in the long term it accelerates inflation and leads to worse problems down the road. The economy is exhibiting deterioration at the edges and that is to be expected for an economy that has been so badly misused. What is left of manufacturing is in decline and until the system is purged such deterioration will continue. It is not only the US, but also the UK and Europe that have followed the Keynesian course and then display suppression when inflationism overrides their systems. These governments are shortsighted and do not posses the strength to cut expenses and raise taxes. They will come slowly when it is to late. They do not seem to understand balance and sacrifice.

Price regulation and wage controls are artificial answers and only expose economic decay and in time fail to work. This value distortion leads eventually to a barter type system, which is inefficient. Then again this would not be necessary if the currency system had not been abused as it had been. This is what happens to nations that wallow in debt in excess of 100% of GDP. The excuses are multifold but the results are always the same, and that is default. Those who created the system in which we are now enmeshed know exactly what they are doing. This game of controls and more money and credit only buys time to pick the right spot to pull the plug and begin another war. We can never understand how bankers can believe the system will collapse, but they remain immune. These same bankers have been in part responsible for current and future inflation and the proliferation of derivatives, which create a faux system within a system. Once these derivatives unravel they will create an explosion at the heart of the banking system. That will take out the top five banks in the US.

There has been no reform and there will not be any. Tariffs will come when it is too late, as will regulatory reform. The proliferation of fiscal debt will continue, as will the exorbitant creation of money and credit. They cannot stop. If they do the system will collapse. That will happen, but only when those driving and controlling the system allow it to do so. We have just witnessed the disinformation calculated to deceive the public into believing that there is a recovery afoot. Nothing could be further from the truth. What little upside that was seen was a lift via price inflation. When figures are released there is never an addendum explaining that if inflation were removed, what the statistics would really be. That is why we have a 5 to 10 year bull market in gold and silver ahead of us, whose presence is so powerful that no governments or central banks can regulate, suppress or overwhelm it.

We have learned from studying the history of currencies for the last 6,000 years, that gold and silver are the only real currencies. Recently we have seen a 40-year hiatus, but, of course, in the history that is the blink of an eye. Being mortal is disturbing because you can see history, but not the future. But we say you can approximate the future by learning about the past. His-story, the history of man. Bankers wed to the fractional banking system really despise gold as a backing for currencies, because it dos not allow them to create infinite amounts of money and credit. This leads in time to monetary debasement and the kind of conditions we are witnessing today. As we said previously, we have seen an almost entirely unnoticed titanic struggle between the US dollar and gold over the past 2-1/2 years, and gold has been the winner hands down. Now we are seeing the inflation factor come into play.

The Fed at the same time continues to support the bond market to keep interest rates low, even going to the extent of manipulating the Treasury Inflation Protection Securities to create an illusion that inflation is a minor factor. The manipulation of bond prices in the US Treasury market has all but driven all investors, both foreign and domestic, away from these markets. Finally investors, particularly professionals, see the situation for what it is - plain and simple fraud. In addition, they are tired of observing the scams totally lacking in prosecution to say nothing of the selective corporate welfare, which has been doled out to fellow Illuminists. All they can see is unbridled monetization and inflation and lower dollars as far as the eye can see.

In recent developments the US, England and France have declared a so-called NATO war against Libya. They have frozen $32 billion held in trust by the US in the US. That is the largest amount ever held by the US concerning a foreign country’s asset. The three countries want Libya’s oil, four water aquifers, central banks and their 484.5 tons of gold, plus the Libyan funds held by other countries. These three want to steal it all and leave the country destitute. The EU has in addition frozen $67 billion. It is thought that because the US is desperate for funds that they will now put into the economy those funds to help keep the economy from collapsing.

The US Treasury and the Fed have created a giant bond fraud and the world’s professionals and governments are well aware of it. If they have to take the US dollars in trade they have to take the inflation that comes with them.

They not only have to tend to inflation in their own economies, but fight off dollar inflation as well. That is why nations are dumping US dollar as soon as they receive them by buying raw materials, investing in land, real estate, plant and equipment and gold and silver.

The bankers and the western governments now expect us to believe that Osama bin Laden is dead. He died years ago. This is just more propaganda for a distraction to more important matters, such as the deterioration and collapse of the western financial system. Anything to keep the game going, anything to deceive. We see no comment in any media that the US and European countries had frozen some $32 billion in US banks and $67 billion in European banks of Libyan sovereign wealth funds. As you have seen desperate people do desperate things. These funds do not belong to Mr. Gaddafi, they belong to the Libyan people. It is simple the west is broke and needed the funds. When you see Chatham House all over the European news you know the black nobility executed this.

As such events occur we have Fed Chairman Mr. Bernanke totally lacking integrity telling us there is little inflation and that the Fed just needs more time to complete recovery. What recovery, it must be hiding because we do not see it? What the Fed is doing is no monetary experiment. It has been tried over and over again through the centuries and it is well known among professionals that what Mr. Bernanke is doing does not work. When you hear from Mr. Bernanke that commodity price effects will likely prove transitory, when there has been a bull market in commodities since 1999, and that bull market is getting stronger, you have to question Mr. Bernanke’s integrity. He reminded us of the dollar’s previous comeback proved the safe-haven status of the dollar. How laughable. The rally created by banks was market rigging and we exposed what they were up to early. They are now running the euro up to make even more profits.

This week or next the euro should reverse its rally as meetings resume in Greece. To these people currencies, gold and silver, commodities and markets are like footballs to be kicked around. It is not surprising that long-term confidence in the dollar is falling as uncertainty and instability, along with climbing inflation are becoming noticeable. There is no question the Fed has spent many years off course serving its owners and controllers in banking and on Wall Street. This time it is different. This time they are taking the whole system down deliberately to force the peoples of the US, UK and Europe to accept world government. This is not abrogation of responsibility or incompetence; this is willful greed and destruction. In QE1 and QE2, the banks and Wall Street were saved and then the Treasury. Little was done to address what was going on in the real economy. All credit, monetary and fiscal policy, was used to extend the health of the financial community and select transnational conglomerates.

Speculation has been the result of credit expansion almost all of which was pointed at Wall Street, banking and AAA rated transnational conglomerates. We find it interesting that all commentary and reports are based on Fed assumptions. Their policies and end game are rarely questioned, especially when other professionals know what they are up too and they know it does not work. Is it because they are Keynesians? In part yes, but the key is they are afraid to speak out, because if they do they lose their jobs, or in some cases are suicided. These people play hardball and they are unmerciful killers. If you don’t believe that just look at all the wars they have created and financed on both sides. You cannot approach what the money powers are up to with logic and reason. You are dealing with a predatory animal that will out of hand kill its own for power and survival.

How can anyone believe the Fed Chairman when he tells us that there are well-anchored inflation expectations, when real inflation is about 10% and even the uneducated public understands that? This is a monstrous lie, all and sundry know that, yet the media and the powers behind government perpetuate that lie cloaked in propaganda.

As a results of such prevarication gold and silver hit new highs. That has of course brought a barrage of sell recommendations from the regular suspects on CNBC, CNN and Bloomberg, along with the comments of silver mania, bubble, etc. What is worse though are the 96% of newsletter writers who have been consistently wrong for the past five years. It is sell, sell and switch to gold. The coin dealers go right along with the program for profit of course. What a woeful gaggle of dunces and opportunists.

The public doesn’t believe the Fed inflationary lie nor do professionals believe a weak dollar is good for the economy. For Bernanke to even allude to higher official interest rates is laughable. These same “expert”’ observers go right along with the perpetuation of what the Fed has done for a century and that is rob the public blind. Very few want to return monetary policy to the Treasury and perhaps honest transparent policies, that put the American people first, not Fed shareholders.

As we said three years ago, the Fed will expand money and credit until it cannot any more and then they’ll have a new world war to eliminate population and distract the public’s attention away from social, financial and economic chaos.

Right now the big push is to sell silver to buy gold based on the gold-silver ratio. We have been in the markets for 52 years and that ratio has never worked. All the traders who listen to this foolishness will end up last in line. Jackrabbit trading is for losers, we know we were traders for 25 years.

What does not seem to be self-evident among investors and others in that the same group controls Treasury and the Fed. They do what they feel like doing and the media, which they own and control, does exactly as they are told. Writers and commentators say we need more rules to control the Fed. What we need is an end to the Fed, but these weak willed characters refuse to say that because they do not want the wrath of the elitists down on them. What a scurrilous group. There are not going to heavy new rules, because the people who control the Fed have purchased 95% of congress and the judiciary. There has to be violent and radical change and unfortunately there is only one way that can come about.

theinternationalforecaster.com

The Man Who Changed Our Way of Life Forever

The latest essay from Martin Amrstrong on freedom, justice and Osama bin Laden.....read here

John Williams - U.S. dollar remains on track for an eventual complete collapse into hyperinflation

"The extreme volatility seen in the price of silver—exacerbated by tightened margin requirements—and the la large swings in the price of gold, price of oil and in certain U.S. dollar exchange rates, do not in any way change the long-term outlooks for the U.S. dollar or for the long-term hedges against a collapse in U.S. dollar purchasing power. The current markets leave open the potential for near-term jawboning (official or through market intermediaries) and government intervention (overt or covert) to encourage relative U.S. dollar strength. Despite whatever volatility there may be, the U.S. dollar remains on track for an eventual complete collapse in a hyperinflation, and the roots of that hyperinflation remain embedded in the system. The primary hedge against losing U.S. dollar purchasing power remains physical gold (and silver), with some funds outside the U.S. dollar. As discussed in the Hyperinflation Special Report (2011), I still like the Swiss franc, Canadian dollar and Australian dollar." John Williams, 6 May 2011 Shadow Stats.com

Greece Joins Belarus as Europe’s Lowest-Rated as S&P Cuts

From Bloomberg:

Greece’s credit rating was cut two levels to B from BB- by Standard & Poor’s, which said further reductions are possible as the risk of default rises.

Another cut would make Greece the lowest-rated country in Europe as today’s reduction, the fourth by S&P since April 2010, left it even with Belarus. The yield on Greek 10-year bonds rose 21 basis points to 15.7 percent, more than twice the level of a year ago when Greece accepted an international bailout.

The S&P decision came on the first business day after an unannounced Friday evening meeting of European finance ministers May 6 in which they agreed Greece needed more help to avoid a restructuring. Extended repayment terms and demands for collateral may be part of a new aid plan. Moody’s Investors Service today placed Greece’s B1 rating on review for downgrade....read on