Why Oil, Gold, Silver, Nickel, and the Canadian Dollar, Cost More - Tilted Forum Project Discussion Community

host · 08-19-2006, 10:50 AM

I've advocated in a number of posts, a proposal that the U.S. government issue a sudden ulitmatum to the other nuclear powers in the world, that they agree to disarm immediately, or the US will do it for them.

We in the US, are running out of time, because over time, the purchasing power of the dollar is deteriorating, and will continue to do so....we are already past the point of no return. The rise in the value of the Canadian dollar is a harbinger of the diversion of purchasing power of two currencies that reflect the wealth potential in the respective countries.

We live in a world of fiat money and fractional reserve banking. "Money" is created out of thin air, via debt creation. Every mortgage or loan that originates from a bank, is "new money". Banks create a debt instrument, the borrower signs it, the check that is issued is cashed against deposits that are only a tiny fraction of the amounts that banks are allowed to lend. If banks were only permitted to lend what was on deposit, minus an ample reserve against periods of heavy withdrawals (Y2K fears were a recent example), the line for loans and mortgages, and the interest rates, would skyrocket, growth would slow, and, considering that we "enjoy" a negative savings rate, even in a recent climate of high growth, where would the savings deposits come from to satisfy the loan demand, and still keep interest rates so low?

We currently live in a country whose consumers borrow a billion dollars per day from the rest of the world, just to purchase oil at today's prices, and almost another $1.5 billion per day for everything else that we impost, vs. the much lower value of what the rest of the world buys from us. The federal government must also finance at least another billion dollars per day in new borrowing because it spends that much more than it collects in taxes and other revenue.

Canada, on the other hand, exports more than 1 million bbls/per day of oil....mostly to the US, that it collects more than $70 million per day from, along with many other exported raw materials.

The reason that US interest rates do not skyrocket due to all of the US borrowing, is because all of the dollars that Chinese and Japanese exporters receive in exchange for the goods that we buy, are purchased by the central banks of Japan and China with yen and renminbi (yuan), that are printed out of "thin air", exchanged for dollars that companies like Toyota receive from the US, and then are used by the Japanese and Chinese central banks to purchase T-Bills issued by the US treasury to finance our huge borrowing.

The Chinese and Japanese print their paper money to prevent the value of it from increasing, the way the Canadian dollar, and oil, and gold, etc. have increased, because they do not want the goods that they make and export, to become less affordable in the US, their biggest customer.

If the US experiences an economic slowdown, and/or the value (purchasing power) of the dollar continues to drop to where average US consumers lack the ability to purchase both energy (gasoline, nat. gas, electricity) and consumer goods from Wal-Mart or Toyota.....but continues to run an $800 billion trade deficit (due to even higher prices for Canadian oil, adjusted for the "scam factor" of the "thin air" yen/yuan prop up of the dollar), and a big federal budget deficit, due to less tax revenue from lower corporated earnings, and continued GWOT expenses.....there will be less dollars coming to Chinese and Japanese exporters, for the central banks of those countries to print paper money to buy....and less US debt/T-Bills purchased by those two country's central banks.

When that happens, the only way to attract new lenders, will be to pay higher interest rates to those lenders. Oil exporters like Canada, Saudi Arabia, Venezuala, and Iran, already require more and more paper dollars that are propped up by yen and yuan that are printed out of "thin air", in exchange for a resource of real value.....oil, than ever before. These countries are either producing less oil than a year ago, even with the incentive of record high prices per bbl....in dollars, than ever before, or in the case of Canada, at a higher expense because of the higher cost of turing oil sands into petroleum, vs. pumping it from naturally pressurized underground pools of oil.

Even with less demand that an economic downturn will trigger, every new bbl sold will cost more to replace and bring to market, and only higher US interest rates will make it attractive to oil producers to accept even $70 per bbl, next year, for their oil.

Who is taking the risk by buying US T-Bills at ridiculously low interest rates now, considering the likelihood that US dollars will devalue at a greater rate than the interest paid on the T-Bills? It doesn't seem to be the central banks in Japan and China....they bought the T-Bills with dollars that they bought from exporters in their own countries, with yen and yuan that they printed out of....."thin air". This isn't new....and it isn't "news"....Japan has been engaged in this for more than ten years.

China and Russia are growing richer as the US grows poorer. A visit to "Janes", on the internet will show you that the US nuclear arsenal and delivery capability is overwhelming, and that China has less than 25 nuclear ICMBs, and that Russia is about to embark on an ambitious modernization program of it's degraded, negelcted, and antiquated, nuclear arsenal.

The purchasing power trend for the dollar is in crisis. Even if you argue that it is in "slow motion" fall, consider that when the Euro debuted, just six years ago, a dollar bought 1.2 euros, and buys just .77 euros, now.

Liberals pontificate with moral outrage to my proposal, that is starkly absent when it comes to their defense of abortion on demand. "Ohhhh noooo", they exclaim...."it is immoral to threaten or intimidate Russia and China into disarming, and attacking them with nuclear weapons if they refuse a US ulitmatum". Okay.....the dollar is imploding, trends in wealth flow and known military strategies of China and Russia indicate that they will upgrade their nuclear armament, and your plan to preserve a strong US defense capability and economy....is ??????? I'm waiting........

ubertuber · 08-19-2006, 12:25 PM

If the decline of the dollar relative to other currencies continued as far as you postulate... And if the maintenance of a certain size military pertained within that weakened economic world... Wouldn't that just make us the next Russia - with a large standing military we're unable to pay for and keep up, therefore making the US the next nightmare in terms of securing weapons, etc. that can no longer be maintained and controlled?

host · 08-19-2006, 12:44 PM

Quote:

Originally Posted by ubertuber

If the decline of the dollar relative to other currencies continued as far as you postulate... And if the maintenance of a certain size military pertained within that weakened economic world... Wouldn't that just make us the next Russia - with a large standing military we're unable to pay for and keep up, therefore making the US the next nightmare in terms of securing weapons, etc. that can no longer be maintained and controlled?

Yes....it would, but I expect that the more likely reaction will be to lash out with an already degraded military, once the actual impact of the decline of the dollar prevents the government paying military contractors, or even the troops, with anything of signifigant value, at first....at countries that have large petroleum reserves, on the pretense of "securing" the "fields", but more realistically, securing acceptance of dollar payment at a "persuaded" price (as the US seems to be doing already.....), and then at anyone who gets in the way....China first, and then Russia.

Pre-emption with a centerpiece on forced disarmament, launched at the earliest possible date, is the high probability success option, IMO. If the outcome is that the US is the only remaining, nuclear power, even if the cost is the nuclear destruction of a few large US cities, in a worst case scenario,
either China or Russia would be annhialated under that scenario, and the US would have no competition that it does not choose to accept, and the advantage of a currency enhanced by the rehabilitated reputation of it's military supremacy.

There really is no other option....it is that bad.....now....just waiting for the other shoe, that a bankrupted government and a destroyed paper currency, in a world of two formidable and rapidly emerging rivals, will drop on us.

We've viewed the spectacle of the Soviet fleet rusting at it's Black Sea, North Sea, and Siberian ports, and we are a few devaluation shocks away from experiencing a similar fate. $3 trillion in new federal borrowing and $4 trillion in new trade imbalances in just the last half dozen years, brings us to this brink.

cyrnel · 08-19-2006, 01:24 PM

I wish you guys wouldn't reinforce my phobias. Big changes seem inevitable, even if we last 20yrs longer.

Will California be our first Ukraine?

Hoping for encouraging words from those more familiar with international finance.

The_Jazz · 08-19-2006, 03:27 PM

Ok, I really don't see how international monetary problems have anything to do with nuclear disarmament or how, if your plan was successful, disarmament would bring any sort of economic benefit or how the US could keep anyone from rearming.

Remember the number of nations with nuclear capability. Off the top of my head, I count 11 (UK, France, Russsia, Belorussia, Ukraine, Kazakstan, N. Korea, India, Pakistan, Israel and Canada) with at least 3 others (Brazil, S. Africa and Germany) probably able to produce a bomb in a year should they so choose. If all 11 simulateously attack the US (which is the actual worst case scenario) in the face of forced disarmament, North America becomes uninhabitable. We don't lose a few cities (and since I live in Chicago - a probable target city - thanks for offering up my life in your hairbrained scheme), we lose everything except maybe some of the Aleutian Islands and some deep mineshafts. If Russia and China alone attack us, the same outcome is probable. If Russia attacks us alone, it depends on their targeting, but expect to lose not 4 or 5 large cities but more like every city with 100,000+ people. One rocket could potentially take out all of New England with multiple entry warheads. The Russian Rocket Corp is one of the few well-funded parts of their military, and it remains the elite assignment. Clearly you need to brush up on the Mutually Assured Destruction doctrine and what it's all about.

Look, I'm all for monetary reform, but your suggestion is tatamount to trying to hold back the tide. There is no way in hell that it would ever work, and the best case scenario, as I see it, is an arms race that reinvigorates the military industrial complex.

Charlatan · 08-19-2006, 04:14 PM

Jazz, while Canada is nuclear power producing nation, we are nuke weapon free. While I suppose Canada could build the weapons if we wanted, it would not escape the notice of our neighbours to the south (or the rest of the world).

Host: just for clarity... there is an aspect of Canada's wealth that you have lef t out. Indeed we are getting wealthier off of our oil and gas exports, and to a lesser extent our raw materials. Two things spring to mind: one, the oil and gas can't last forever and two, we ship raw materials out and pay more to bring them back as finsihed goods. Our manufacturing sector is in the shits. If we could process our own resources and sell them finished, at higher prices... that would be golden.

Otherwise I don't disagree with your assesment of the econmomic situation (just the need to bomb the world's other nuclear powers).

host · 08-19-2006, 05:05 PM

Quote:

Originally Posted by The_Jazz

Ok, I really don't see how international monetary problems have anything to do with nuclear disarmament or how, if your plan was successful, disarmament would bring any sort of economic benefit or how the US could keep anyone from rearming.......

......Clearly you need to brush up on the Mutually Assured Destruction doctrine and what it's all about.

Look, I'm all for monetary reform, but your suggestion is tatamount to trying to hold back the tide. There is no way in hell that it would ever work, and the best case scenario, as I see it, is an arms race that reinvigorates the military industrial complex.

You need to do the "brushing up", The_Jazz.....and I'll do the "thinnin" around here, Babalooey !

MAD was yesterday....meet the new concept....and the targets are Russia, and to a lesser extent, China. Nations allied with the US now, will be inclined to cooperate. The US enforces the ban, as I've described in other posts...with weapons inspections and permanent occupation of areas in Russia or China, or wherever else it is deemed neccessary, by US troops/weapons inspectors; of areas where weapons or delivery systems, are stored, designed, or manufactured.

It's simple....the dollar is done, unless our leaders are willing to leverage one of the things that's destroyed the dollar, the unparalleled US strategic advantage; a temporary benefit of the out of control military industrial complex, or if it is not exploited effectively, and soon, the MIC boondoggle:

Quote:

http://www.foreignaffairs.org/200603...r-primacy.html
The Rise of U.S. Nuclear Primacy
Keir A. Lieber and Daryl G. Press
From Foreign Affairs, March/April 2006

Summary: For four decades, relations among the major nuclear powers have been shaped by their common vulnerability, a condition known as mutual assured destruction. But with the U.S. arsenal growing rapidly while Russia's decays and China's stays small, the era of MAD is ending -- and the era of U.S. nuclear primacy has begun......

PRESENT AT THE DESTRUCTION

For almost half a century, the world's most powerful nuclear states have been locked in a military stalemate known as mutual assured destruction (MAD). By the early 1960s, the nuclear arsenals of the United States and the Soviet Union had grown so large and sophisticated that neither country could entirely destroy the other's retaliatory force by launching first, even with a surprise attack. Starting a nuclear war was therefore tantamount to committing suicide.

During the Cold War, many scholars and policy analysts believed that MAD made the world relatively stable and peaceful because it induced great caution in international politics, discouraged the use of nuclear threats to resolve disputes, and generally restrained the superpowers' behavior. (Revealingly, the last intense nuclear standoff, the 1962 Cuban missile crisis, occurred at the dawn of the era of MAD.) Because of the nuclear stalemate, the optimists argued, the era of intentional great-power wars had ended. Critics of MAD, however, argued that it prevented not great-power war but the rolling back of the power and influence of a dangerously expansionist and totalitarian Soviet Union. From that perspective, MAD prolonged the life of an evil empire.

This debate may now seem like ancient history, but it is actually more relevant than ever -- because the age of MAD is nearing an end. Today, for the first time in almost 50 years, the United States stands on the verge of attaining nuclear primacy. It will probably soon be possible for the United States to destroy the long-range nuclear arsenals of Russia or China with a first strike. This dramatic shift in the nuclear balance of power stems from a series of improvements in the United States' nuclear systems, the precipitous decline of Russia's arsenal, and the glacial pace of modernization of China's nuclear forces. Unless Washington's policies change or Moscow and Beijing take steps to increase the size and readiness of their forces, Russia and China -- and the rest of the world -- will live in the shadow of U.S. nuclear primacy for many years to come.

One's views on the implications of this change will depend on one's theoretical perspective. Hawks, who believe that the United States is a benevolent force in the world, will welcome the new nuclear era because they trust that U.S. dominance in both conventional and nuclear weapons will help deter aggression by other countries. For example, as U.S. nuclear primacy grows, China's leaders may act more cautiously on issues such as Taiwan, realizing that their vulnerable nuclear forces will not deter U.S. intervention -- and that Chinese nuclear threats could invite a U.S. strike on Beijing's arsenal. But doves, who oppose using nuclear threats to coerce other states and fear an emboldened and unconstrained United States, will worry. Nuclear primacy might lure Washington into more aggressive behavior, they argue, especially when combined with U.S. dominance in so many other dimensions of national power. Finally, a third group -- owls, who worry about the possibility of inadvertent conflict -- will fret that U.S. nuclear primacy could prompt other nuclear powers to adopt strategic postures, such as by giving control of nuclear weapons to lower-level commanders, that would make an unauthorized nuclear strike more likely -- thereby creating what strategic theorists call "crisis instability."

ARSENAL OF A DEMOCRACY

For 50 years, the Pentagon's war planners have structured the U.S. nuclear arsenal according to the goal of deterring a nuclear attack on the United States and, if necessary, winning a nuclear war by launching a preemptive strike that would destroy an enemy's nuclear forces. For these purposes, the United States relies on a nuclear triad comprising strategic bombers, intercontinental ballistic missiles (ICBMs), and ballistic-missile-launching submarines (known as SSBNs). The triad reduces the odds that an enemy could destroy all U.S. nuclear forces in a single strike, even in a surprise attack, ensuring that the United States would be able to launch a devastating response. Such retaliation would only have to be able to destroy a large enough portion of the attacker's cities and industry to deter an attack in the first place. The same nuclear triad, however, could be used in an offensive attack against an adversary's nuclear forces. Stealth bombers might slip past enemy radar, submarines could fire their missiles from near the enemy's shore and so give the enemy's leaders almost no time to respond, and highly accurate land-based missiles could destroy even hardened silos that have been reinforced against attack and other targets that require a direct hit. The ability to destroy all of an adversary's nuclear forces, eliminating the possibility of a retaliatory strike, is known as a first-strike capability, or nuclear primacy......

Read the background on US capabilities:

Quote:

http://www.thebulletin.org/article_n...ofn=jf06norris
NRDC: Nuclear Notebook
U.S. nuclear forces, 2006

....and here is a decent examination and reaction to the above article:

Quote:

http://russianforces.org/blog/2006/0..._primacy.shtml
Speaking of nuclear primacy

As the history of the cold war clearly demonstrates, nuclear primacy is a notoriously poorly defined and elusive goal. This is why it was very interesting to read the article by Keir Lieber and Daryl Press, “The Rise of U.S. Nuclear Primacy”, in the March/April issue of Foreign Affairs. The authors argue that the United States has achieved (or is just about to achieve) nuclear primacy, which would make the concept of mutual assured destruction obsolete by taking “mutual” out of it. The United States, the authors argue, is getting the capability of destroying all (and they mean literally every single one) Russian strategic launchers in a first counterforce attack. A longer article, which the authors promise will contain details of the model they used to calculate effectiveness of a first strike, will appear in the Spring issue of International Security.:

Quote:

http://bcsia.ksg.harvard.edu/BCSIA_c...ieberPress.pdf
The End of MAD? The Nuclear Dimension of U.S. Primacy
Lieber, Keir A., and Daryl G. Press. "The End of MAD? The Nuclear Dimension of U.S. Primacy." International Security 30, no. 4 (Spring 2006, forthcoming): 7-44.
It's at the link above, and it's 38 pages. I haven't read it yet...- host

The argument looks convincing at first – Lieber and Press paint the familiar picture that many now take for granted – decline of the Russian strategic forces, gaps in the early-warning network, and all that. But a closer look at the article reveals a number of factual errors and unsubstantiated statements, which in my view completely undermine its conclusions.....

....so, The_Jazz....it isn't BS....it's a concept that merits consideration. We are fucked, financially. We show no inclination to rein in our lifestyle. Our government invested in these terrible capabilities, and we should examine and discuss where we are, if we are in a financial crisis, and whether to let event overtake us, whether to over react later, lashing out when it's too late to do what we might pull off now.....or leverage our investment in nuclear primacy at the earliest possible moment.

You are naive if you don't think that these options are officially being discussed and planned for, or that they won't save the dollar, temporarily, at least, if the most aggressive military option was carried out to it's fullest potential.

The challenge and the question is, why aren't we, the people, discussing them. I've described the "fix" that we are all in...it is a crisis, and we have access to quite a bit of information, so it seems hypocritical, possibly defeatist, and even silly, to use the excuse that such a discussion is "unthinkable". We funded and built all of this shit, if we don't use it, it should be because we decided not to, fully aware of the consequences of that decision.....willful inclination to submit to Russian and Chinese hegenomy, as soon as a decade from now....or postponement of the inevitable use of the military option, when we are cornered and weakened, only after the dollar implosion event has overtaken us.....what's it gonna be?

The_Jazz · 08-19-2006, 06:05 PM

Host, the fact that you're willing to sacrifice millions of lives in this scheme makes it a joke from the outset. Anyone in a position of power who proposed this sort of "fix" should be immediately fired or impeached (depending on the position) for it since such a thing absolutely abhorent.

If we're going to continue this, I want to know that you are moving into harms way. If you're willing to sacrifice MY life for the sake of the dollar, you should be willing to give up yours too. Oh, move your family along with you, too.

The fact that you actually seem to be taking this seriously makes me question your sanity. And before you start accusing me of being a liberal, please name a single nationally known leader who advocates this kind of position. I'd love to know who it is.

By the way, I do conceed that we're in a deep hole financially and that we may even be past the point of no return. But for you to be blase' about deaths of millions is offensive.

cyrnel · 08-19-2006, 06:37 PM

Host, I'll be very surprised if this isn't leading up to something completely different.

It has crossed my mind that our military will become our final advantage in the next decade, but to think we as a society would collectively decide the nuclear option is rational seems unlikely. China seems to think we'll go the conventional route, if their buildup is any indication. If you're suggesting a first strike could happen as part of a sequence of managed events and responses by leadership I'd agree. That's entirely possible. I just don't believe we'll (the public) ever discuss it as other than hypothetical "war gaming."

If we were to cross the threshhold and decide our mostly self-inflicted situation is justification to plan for and unleash first strikes then the winning side is not where I want to be.

Slap me for even posting in this thing.

streak_56 · 08-19-2006, 06:51 PM

We're our wealthiest when we're kids because we own nothing.

fresnelly · 08-19-2006, 06:55 PM

I don't see how a nuclear bomb solves anything for anyone. Misery all around.

host · 08-19-2006, 08:10 PM

Quote:

Originally Posted by The_Jazz

Host, the fact that you're willing to sacrifice millions of lives in this scheme makes it a joke from the outset. Anyone in a position of power who proposed this sort of "fix" should be immediately fired or impeached (depending on the position) for it since such a thing absolutely abhorent.

If we're going to continue this, I want to know that you are moving into harms way. If you're willing to sacrifice MY life for the sake of the dollar, you should be willing to give up yours too. Oh, move your family along with you, too.

The fact that you actually seem to be taking this seriously makes me question your sanity. And before you start accusing me of being a liberal, please name a single nationally known leader who advocates this kind of position. I'd love to know who it is.

By the way, I do conceed that we're in a deep hole financially and that we may even be past the point of no return. But for you to be blase' about deaths of millions is offensive.

Let's agree not to personalize this. I'm trying to respond with everything that you have asked for. This is not about me. I am examining a problem.....the crisis that our country is in. We seemed to be trapped now. What have we invested in that might help us to escape from the "trap"?

My personal believe is that a "first strike" should be an unthinkable solution. What I'm going to present shows that it has been thought about, and planned for. The head of DOD during my childhood, Robert McNamara. is quoted below, telling us that he is concerned at the direction and attitude related to the first strike pre-emptive use of nuclear weapons that the Bush administration is steering toward. McNamara says at the end of his 2005 article that it is time for the people of the US to stop avoiding discussion of this issue.

McNamara highlights the belief that I believe is pervasive among the military and civilian leadership that it is immoral to use nuclear weapons against a non-nuclear capable adversary. I find no issue of morality mentioned when it comes to launching a first strike against a nuclear capable adversary. I suspect that this is because, when another nation decides to aim such weapons or build delivery systems to send such weapons in our direction, they have committed to holding a gun to our heads, and from then on, all bets are off. The attitude seems to be that if we have an opportunity to "get the drop on them", it is appropriate to send a first strike at them to eliminate the nuclear threat that they have set up against us, no matter who they are.

My own question....does anyone think that France or Britain has nuclear missles targeted at any US assets, or plans to quickly implement such targeting or delivery of nuclear weapons on us? That seems an appropriate test, as to who it is or is not....immoral to pre-emptively strike first at.

cyrel, your wrote "If we were to cross the threshhold and decide our mostly self-inflicted situation is justification to plan for and unleash first strikes then the winning side is not where I want to be."

I am in this discussion because I think that it is going to get bad enough around here, economically speaking, before most think that it will, including the leadership of the US. Since it seems inevitable that they will initiate a first strike scenario......but only after the odds of succeeding are much degraded from where they are in the near future, I would rather see them embark early, and at the height of our strategic and what is left or our dollar purchasing strength, to issue a worldwide disarmament ultimatum, followed by, or simultaneously, after their most thorough consideration, a nuclear first strike sufficient to wipe out as much potential retaliation response capability as we are capable of.

Since our defense policy is not to rule out a first strike, I have to assume that they will do one, at some point, if the dollar implodes dramatically enough. I just want them to do it at the right time, and that would be preceded by informed discussion, like I want this to be, followed by telegraphing a broad grassroots consensus to our leaders:
Something like, either renounce your policy of pre-emptive first strike, or do it at the right and best fucking time !

Quote:

http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB56/
First Strike Options and the Berlin Crisis, September 1961
NEW DOCUMENTS FROM
THE KENNEDY ADMINISTRATION

National Security Archive Electronic Briefing Book No. 56
William Burr, Editor

September 25, 2001

Fred Kaplan first explored White House nuclear policy and the Berlin crisis in his path-breaking book on U.S. nuclear planning, The Wizards of Armageddon (New York, Simon and Schuster, 1983). In the course of his research he interviewed a number of Kennedy administration officials, including NSC staffer Carl Kaysen. Kaysen told him that, during the summer of 1961, when East-West tensions over Berlin threatened to turn dangerous, he had prepared a study on the possibility of a limited first strike against the Soviet Union. Nearly twenty years later, that study was declassified (with excisions that are under appeal at the Defense Department). What motivated Kaysen was his concern that the U.S. nuclear war plan--the Single Integrated Operational Plan (SIOP)-- involved an unimaginably catastrophic attack involving thousands of nuclear weapons.(1) The SIOP included an option for preemption, a first strike in the event that Washington had strategic warning of an imminent Soviet attack, but that was not what Kaysen had in mind. In keeping with then-current interest in controlled nuclear response and presidential options, he wanted the president to have military alternatives that involved less loss of life in the Soviet Union and less danger to U.S. territory. Therefore, he proposed contingency planning for a limited nuclear first strike on the handful of Soviet ICBMs. Kaysen recognized that there were risks and uncertainties in such a plan, but he nevertheless believed that a limited approach would encourage the Soviets to avoid attacks on U.S. urban-industrial targets as well as "minimiz[e] the force of the irrational urge for revenge."

.....On 19 September, a few weeks after Smith prepared the summary of Kaysen's report, Taylor presented Kennedy with the same text.(3) Apparently Taylor discussed the summary of Kaysen's paper with the president because on the same day he presented JCS Chairman Lemnitzer with a series of questions that must have arisen in the course of discussion. However the questions were prepared, they clearly reflected the concerns of President Kennedy and Secretary of Defense McNamara, among others, about SIOP-62 (for FY 1962). For example, Kennedy wondered if it would be possible to fashion attacks that excluded urban areas or "governmental controls", China, or the East European satellite states. SIOP-62 entailed a massive attack on targets in Eastern Europe, the Soviet Union, China, North Korea, and North Korea. Thus, if China was not in the war, it would nevertheless be subject to attack. Undoubtedly influenced by Kaysen's report, Kennedy also asked questions about the feasibility of a limited first strike, the prospect of redundant destruction (overkill), and the danger of a false alarm, among others.....

.......Taylor transmitted Kennedy's questions for consideration by Commander-in-Chief Strategic Air Command (CINCSAC) Thomas Power who to meet with Kennedy, Lemnitzer, Taylor, and military aide General Chester Clifton. Only this brief record of the discussion is available and little of it directly bears on the president's questions. If there was any discussion of an "alternative first strike plan," it was not recorded. Part of the discussion centered on General Power's doubts about the latest intelligence estimates of Soviet strategic missile forces--that Moscow only had about 20 ICBM pads. Lemnitzer and Taylor disagreed with Power, who had the audacity to recommend the resumption of U-2 flights over the Soviet Union. In addition, Power believed that there was a risk of a Soviet surprise attack; if "general atomic war was inevitable" he recommended striking first once key Soviet nuclear targets were located. Kennedy did not comment on Power's advice but he was concerned enough to ask his military advisers to find out how long it took the Soviets to launch their missiles.(4),,,,,

The following piece stinks with a tone of liberal bias, but my fact check satisfies me that it makes accurate key points that belong in an examination of first strike policy and the policy of preserving single super power status for the US and access to key raw materials.

Quote:

http://www.harpers.org/DickCheneysSongOfAmerica.html
Dick Cheney's Song of America
Drafting a plan for global dominance
Posted on Wednesday, October 26, 2005.

....In early 1992, as Powell and Cheney campaigned to win congressional support for their augmented Base Force plan, a new logic entered into their appeals. The United States, Powell told members of the House Armed Services Committee, required “sufficient power” to “deter any challenger from ever dreaming of challenging us on the world stage.” To emphasize the point, he cast the United States in the role of street thug. “I want to be the bully on the block,” he said, implanting in the mind of potential opponents that “there is no future in trying to challenge the armed forces of the United States.”

As Powell and Cheney were making this new argument in their congressional rounds, Wolfowitz was busy expanding the concept and working to have it incorporated into U.S. policy. During the early months of 1992, Wolfowitz supervised the preparation of an internal Pentagon policy statement used to guide military officials in the preparation of their forces, budgets, and strategies. The classified document, known as the Defense Planning Guidance, depicted a world dominated by the United States, which would maintain its superpower status through a combination of positive guidance and overwhelming military might. The image was one of a heavily armed City on a Hill.

The DPG stated that the “first objective” of U.S. defense strategy was “to prevent the re-emergence of a new rival.” Achieving this objective required that the United States “prevent any hostile power from dominating a region” of strategic significance. America's new mission would be to convince allies and enemies alike “that they need not aspire to a greater role or pursue a more aggressive posture to protect their legitimate interests.”

Another new theme was the use of preemptive military force. The options, the DPG noted, ranged from taking preemptive military action to head off a nuclear, chemical, or biological attack to “punishing” or “threatening punishment of” aggressors “through a variety of means,” including strikes against weapons-manufacturing facilities.

The DPG also envisioned maintaining a substantial U.S. nuclear arsenal while discouraging the development of nuclear programs in other countries. It depicted a “U.S.-led system of collective security” that implicitly precluded the need for rearmament of any kind by countries such as Germany and Japan. And it called for the “early introduction” of a global missile-defense system that would presumably render all missile-launched weapons, including those of the United States, obsolete. (The United States would, of course, remain the world's dominant military power on the strength of its other weapons systems.)

The story, in short, was dominance by way of unilateral action and military superiority. While coalitions—such as the one formed during the Gulf War—held “considerable promise for promoting collective action,” the draft DPG stated, the United States should expect future alliances to be “ad hoc assemblies, often not lasting beyond the crisis being confronted, and in many cases carrying only general agreement over the objectives to be accomplished.” It was essential to create “the sense that the world order is ultimately backed by the U.S.” and essential that America position itself “to act independently when collective action cannot be orchestrated” or in crisis situations requiring immediate action. “While the U.S. cannot become the world's ‘policeman,'” the document said, “we will retain the preeminent responsibility for addressing selectively those wrongs which threaten not only our interests, but those of our allies or friends.” Among the interests the draft indicated the United States would defend in this manner were “access to vital raw materials, primarily Persian Gulf oil, proliferation of weapons of mass destruction and ballistic missiles, [and] threats to U.S. citizens from terrorism.”

* * *

The DPG was leaked to the New York Times in March 1992. Critics on both the left and the right attacked it immediately. Then-presidential candidate Pat Buchanan portrayed it as giving a “blank check” to America's allies by suggesting the United States would “go to war to defend their interests.” Bill Clinton's deputy campaign manager, George Stephanopoulos, characterized it as an attempt by Pentagon officials to “find an excuse for big defense budgets instead of downsizing.” Delaware Senator Joseph Biden criticized the Plan's vision of a “Pax Americana, a global security system where threats to stability are suppressed or destroyed by U.S. military power.” Even those who found the document's stated goals commendable feared that its chauvinistic tone could alienate many allies. Cheney responded by attempting to distance himself from the Plan. The Pentagon's spokesman dismissed the leaked document as a “low-level draft” and claimed that Cheney had not seen it. Yet a fifteen-page section opened by proclaiming that it constituted “definitive guidance from the Secretary of Defense.”

Powell took a more forthright approach to dealing with the flap: he publicly embraced the DPG's core concept. In a TV interview, he said he believed it was “just fine” that the United States reign as the world's dominant military power. “I don't think we should apologize for that,” he said. Despite bad reviews in the foreign press, Powell insisted that America's European allies were “not afraid” of U.S. military might because it was “power that could be trusted” and “will not be misused.”

Mindful that the draft DPG's overt expression of U.S. dominance might not fly, Powell in the same interview also trotted out a new rationale for the original Base Force plan. He argued that in a post-Soviet world, filled with new dangers, the United States needed the ability to fight on more than one front at a time. “One of the most destabilizing things we could do,” he said, “is to cut our forces so much that if we're tied up in one area of the world . . . and we are not seen to have the ability to influence another area of the world, we might invite just the sort of crisis we're trying to deter.” This two-war strategy provided a possible answer to Nunn's “threat blank.” One unknown enemy wasn't enough to justify lavish defense budgets, but two unknown enemies might do the trick.

Within a few weeks the Pentagon had come up with a more comprehensive response to the DPG furor. A revised version was leaked to the press that was significantly less strident in tone, though only slightly less strident in fact. While calling for the United States to prevent “any hostile power from dominating a region critical to our interests,” the new draft stressed that America would act in concert with its allies—when possible. It also suggested the United Nations might take an expanded role in future political, economic, and security matters, a concept conspicuously absent from the original draft.

The controversy died down, and, with a presidential campaign under way, the Pentagon did nothing to stir it up again. Following Bush's defeat, however, the Plan reemerged. In January 1993, in his very last days in office, Cheney released a final version. The newly titled Defense Strategy for the 1990s retained the soft touch of the revised draft DPG as well as its darker themes. The goal remained to preclude “hostile competitors from challenging our critical interests” and preventing the rise of a new superpower. Although it expressed a “preference” for collective responses in meeting such challenges, it made clear that the United States would play the lead role in any alliance. Moreover, it noted that collective action would “not always be timely.” Therefore, the United States needed to retain the ability to “act independently, if necessary.” To do so would require that the United States maintain its massive military superiority. Others were not encouraged to follow suit. It was kinder, gentler dominance, but it was dominance all the same. And it was this thesis that Cheney and company nailed to the door on their way out.

* * *

The new administration tacitly rejected the heavy-handed, unilateral approach to U.S. primacy favored by Powell, Cheney, and Wolfowitz. Taking office in the relative calm of the early post-Cold War era, Clinton sought to maximize America's existing position of strength and promote its interests through economic diplomacy, multilateral institutions (dominated by the United States), greater international free trade, and the development of allied coalitions, including American-led collective military action. American policy, in short, shifted from global dominance to globalism.

Clinton also failed to prosecute military campaigns with sufficient vigor to satisfy the defense strategists of the previous administration. Wolfowitz found Clinton's Iraq policy especially infuriating. During the Gulf War, Wolfowitz harshly criticized the decision—endorsed by Powell and Cheney—to end the war once the U.N. mandate of driving Saddam's forces from Kuwait had been fulfilled, leaving the Iraqi dictator in office. He called on the Clinton Administration to finish the job by arming Iraqi opposition forces and sending U.S. ground troops to defend a base of operation for them in the southern region of the country. In a 1996 editorial, Wolfowitz raised the prospect of launching a preemptive attack against Iraq. “Should we sit idly by,” he wrote, “with our passive containment policy and our inept covert operations, and wait until a tyrant possessing large quantities of weapons of mass destruction and sophisticated delivery systems strikes out at us?” Wolfowitz suggested it was “necessary” to “go beyond the containment strategy.”

Quote:

Apocalypse Soon
By Robert S. McNamara

Page 1 of 5
May/June 2005

http://www.foreignpolicy.com/story/c...id=2829&page=1
The United States and our NATO allies faced a strong Soviet and Warsaw Pact conventional threat. Many of the allies (and some in Washington as well) felt strongly that preserving the U.S. option of launching a first strike was necessary for the sake of keeping the Soviets at bay. What is shocking is that today, more than a decade after the end of the Cold War, the basic U.S. nuclear policy is unchanged. It has not adapted to the collapse of the Soviet Union. Plans and procedures have not been revised to make the United States or other countries less likely to push the button........

No Way To Win http://www.foreignpolicy.com/story/c...id=2829&page=2
I have worked on issues relating to U.S. and NATO nuclear strategy and war plans for more than 40 years. During that time, I have never seen a piece of paper that outlined a plan for the United States or NATO to initiate the use of nuclear weapons with any benefit for the United States or NATO. I have made this statement in front of audiences, including NATO defense ministers and senior military leaders, many times. No one has ever refuted it. To launch weapons against a nuclear-equipped opponent would be suicidal. To do so against a nonnuclear enemy would be militarily unnecessary, morally repugnant, and politically indefensible.....

A Dangerous Obsession
On Nov. 13, 2001, President George W. Bush announced that he had told Russian President Vladimir Putin that the United States would reduce “operationally deployed nuclear warheads” from approximately 5,300 to a level between 1,700 and 2,200 over the next decade. This scaling back would approach the 1,500 to 2,200 range that Putin had proposed for Russia. However, the Bush administration’s Nuclear Posture Review, mandated by the U.S. Congress and issued in January 2002, presents quite a different story. It assumes that strategic offensive nuclear weapons in much larger numbers than 1,700 to 2,200 will be part of U.S. military forces for the next several decades. Although the number of deployed warheads will be reduced to 3,800 in 2007 and to between 1,700 and 2,200 by 2012, the warheads and many of the launch vehicles taken off deployment will be maintained in a “responsive” reserve from which they could be moved back to the operationally deployed force. The Nuclear Posture Review received little attention from the media. But its emphasis on strategic offensive nuclear weapons deserves vigorous public scrutiny. Although any proposed reduction is welcome, it is doubtful that survivors—if there were any—of an exchange of 3,200 warheads (the U.S. and Russian numbers projected for 2012), with a destructive power approximately 65,000 times that of the Hiroshima bomb, could detect a difference between the effects of such an exchange and one that would result from the launch of the current U.S. and Russian forces totaling about 12,000 warheads.

http://www.foreignpolicy.com/story/c...id=2829&page=3
In addition to projecting the deployment of large numbers of strategic nuclear weapons far into the future, the Bush administration is planning an extensive and expensive series of programs to sustain and modernize the existing nuclear force and to begin studies for new launch vehicles, as well as new warheads for all of the launch platforms. Some members of the administration have called for new nuclear weapons that could be used as bunker busters against underground shelters (such as the shelters Saddam Hussein used in Baghdad). New production facilities for fissile materials would need to be built to support the expanded force. The plans provide for integrating a national ballistic missile defense into the new triad of offensive weapons to enhance the nation’s ability to use its “power projection forces” by improving our ability to counterattack an enemy. The Bush administration also announced that it has no intention to ask congress to ratify the Comprehensive Test Ban Treaty (CTBT), and, though no decision to test has been made, the administration has ordered the national laboratories to begin research on new nuclear weapons designs and to prepare the underground test sites in Nevada for nuclear tests if necessary in the future. Clearly, the Bush administration assumes that nuclear weapons will be part of U.S. military forces for at least the next several decades.

.....A Moment of Decision http://www.foreignpolicy.com/story/c...id=2829&page=4
We are at a critical moment in human history—perhaps not as dramatic as that of the Cuban Missile Crisis, but a moment no less crucial. Neither the Bush administration, the congress, the American people, nor the people of other nations have debated the merits of alternative, long-range nuclear weapons policies for their countries or the world. They have not examined the military utility of the weapons; the risk of inadvertent or accidental use; the moral and legal considerations relating to the use or threat of use of the weapons; or the impact of current policies on proliferation. Such debates are long overdue. If they are held, I believe they will conclude, as have I and an increasing number of senior military leaders, politicians, and civilian security experts: We must move promptly toward the elimination—or near elimination—of all nuclear weapons. For many, there is a strong temptation to cling to the strategies of the past 40 years. But to do so would be a serious mistake leading to unacceptable risks for all nations.

Quote:

http://www.voanews.com/burmese/archi...03-16-voa5.cfm
US Security Strategy Upholds First-Strike Military Option
VOA News
Washington
16 March 2006

National Security Agency: Anti-terrorist tool
The White House has issued an updated version of the United States' national security strategy, reaffirming the Bush administration's willingness to consider staging pre-emptive military strikes against hostile nations or terrorist groups.

President Bush notes in today's report that the United States prefers to use diplomacy to halt the spread of dangerous weapons around the world. "However, under long-standing principles of self-defense," the document says, the United States does "not rule out the use of force before attacks occur."

The official statement says such pre-emptive action could take place even if there is "uncertainty" about the time or place of an enemy attack.

The lengthy 49 page document also notes the administration's concerns about the Chinese and Russian governments' current policies, and their effect on the United States' national and economic security.

The national security statement updates policies and strategies President Bush announced in the aftermath of al-Qaida's terror attacks on New York and Washington in 2001. .........

......On China, the White House statement criticizes "old ways of thinking and acting" by Beijing in its competition for energy resources.

China's leaders, the document says, are "expanding trade, but acting as if they can somehow 'lock up' energy supplies around the world or seek to direct markets rather than opening them up."

Reflecting rising tensions between Washington and Moscow, today's report says the Bush administration is worried that Russia is falling off the path to democracy.

"Recent trends regrettably point toward a diminishing commitment to democratic freedoms and institutions," the document says. Future U.S.-Russian relations, it adds, "will depend on the policies, foreign and domestic, that Russia adopts."

Quote:

http://www.globalsecurity.org/milita...nss-060316.htm

The National Security Strategy - March 2006

Released 16 March 2006.

Quote:

http://www.iht.com/articles/2005/09/11/news/nuke.php
Copyright New York Times Company Sep 11, 2005

The Pentagon is preparing new guidelines governing the use of nuclear weapons that foresee possible pre-emptive strikes against terrorist groups or nations planning to use unconventional weapons against the United States.

The draft document, the Doctrine for Joint Nuclear Operations, updates procedures for using nuclear weapons that were last changed in 1995. The plan is undergoing final review by the Pentagon's joint staff and by Secretary of Defense Donald H. Rumsfeld, and it could be finished in the next several weeks, according to a Pentagon official. The document was first reported by The Washington Post.

Much of the document restates longstanding procedures for launching a nuclear strike, including declarations that such a decision requires explicit presidential approval.

A Pentagon official confirmed that a copy of the document posted on the national security Web site GlobalSecurity.org was authentic.

The Bush administration said in 2002 that a pre-emption strategy was necessary to deal with emerging threats from terrorist groups seeking unconventional weapons and from the proliferation of nuclear capability to numerous countries.

Although the unclassified document reasserts the longstanding American position that it will not make definitive statements about when nuclear weapons will be used, it describes several scenarios for using them, including circumstances under which pre-emptive use might be necessary.

The scenarios for a possible attack described in the draft include one in which an enemy is using ''or intending to use'' unconventional weapons against the United States, its allies or civilian populations. Another scenario for a possible pre-emptive strike is in the event of an ''imminent attack from adversary biological weapons that only effects from nuclear weapons can safely destroy.''

The draft document also envisions the use of atomic weapons for ''attacks on adversary installations,'' including ''deep, hardened bunkers containing chemical or biological weapons.''

A copy of the draft document dated March 15 was posted on a Pentagon Web site for several months but was removed over the summer, according to the Pentagon official, who said he could not explain why it was taken down.

The draft says that to deter a potential adversary from using unconventional weapons, the United States must make it ''believe the United States has both the ability and will to pre-empt or retaliate promptly with responses that are credible and effective.'' The draft also says American policymakers have ''repeatedly rejected calls for adoption of 'no first use' policy of nuclear weapons since this policy could undermine deterrence.''

Quote:

http://www.washingtonpost.com/wp-dyn...1001053_2.html
Pentagon Revises Nuclear Strike Plan
Strategy Includes Preemptive Use Against Banned Weapons

By Walter Pincus
Washington Post Staff Writer
Sunday, September 11, 2005; Page A01

....The Joint Staff draft doctrine explains that despite the end of the Cold War, proliferation of weapons of mass destruction "raises the danger of nuclear weapons use." It says that there are "about thirty nations with WMD programs" along with "nonstate actors [terrorists] either independently or as sponsored by an adversarial state."

To deter the use of weapons of mass destruction against the United States, the Pentagon paper says preparations must be made to use nuclear weapons and show determination to use them "if necessary to prevent or retaliate against WMD use."

The draft says that to deter a potential adversary from using such weapons, that adversary's leadership must "believe the United States has both the ability and will to pre-empt or retaliate promptly with responses that are credible and effective." The draft also notes that U.S. policy in the past has "repeatedly rejected calls for adoption of 'no first use' policy of nuclear weapons since this policy could undermine deterrence."....

Ustwo · 08-19-2006, 10:48 PM

Pardon me if I missread the OP but did host just propose war on the rest of the nuclear world?

This is a modest proposal indeed, though he is no Jonathan Swift.

Ch'i · 08-19-2006, 11:49 PM

Edit: Nevermind, heh.

host · 08-20-2006, 12:34 AM

Quote:

Originally Posted by Ustwo

Pardon me if I missread the OP but did host just propose war on the rest of the nuclear world?

This is a modest proposal indeed, though he is no Jonathan Swift.

No problemo.....welcome, fellow conservative and fair tax advocate, let's take a moment to check the pulse of the nation's domestic economy....we'll start with the US manufacturing sector. A milestone was observed last month:

Quote:

http://www.detnews.com/apps/pbcs.dll...362/1148/rss25
Tuesday, July 25, 2006

Foreign cars pass Big 3

For the first time, U.S. consumers are buying more cars and trucks built by foreign automakers than vehicles made by Detroit's traditional Big Three.....

It seems now that GM and Ford will both file for bankruptcy in the next year:

Quote:

http://money.cnn.com/2005/10/10/news...look/index.htm
Will GM follow Delphi into bankruptcy?
One analyst puts chance of bankruptcy at GM at 30% after Delphi filed, but another says no.
October 11, 2005: 3:55 PM EDT
By Chris Isidore, CNN/Money senior writer

Quote:

http://www.bloomberg.com/apps/news?p...uIGZw&refer=us
GM, Ford Sacrifice Car Loan Revenue to Pay $43 Billion in Bonds

Jan. 10 (Bloomberg) -- Things are so desperate for General Motors Corp. and Ford Motor Co. that the largest U.S. automakers are selling their primary source of profit to pay bondholders: car loans that any bank would love to have on its books.

GM and Ford, weakened by price competition, falling sales and junk credit ratings, face record debt maturities this year. The companies need to come up with almost $11 billion in the next month, and a total of $43 billion this year. The amount is equal to almost half of the cash they had in September.....

Quote:

http://www.usatoday.com/money/autos/...mmercial_x.htm
Posted 3/23/2006 9:32 AM

GM sells part of GMAC division
By Chris Woodyard, USA TODAY
General Motors (GM) said Thursday that it has sold a big chunk of one of its financing divisions, a cash-raising deal that is the latest in a series of bold moves by the financially troubled automaker.

GM says its General Motors Acceptance Corp. arm sold 78% of its GMAC Commercial Holding unit, which is involved in commercial mortgage lending and other services, to a group of investors for $1.5 billion in cash.

GM said the unit also will repay $7.3 billion in loans from within the company, bringing cash proceeds from the deal to nearly $9 billion.

The sale comes a day after GM announced a huge buyout offer to 126,000 hourly employees at its plants and supplier Delphi. The buyouts are designed to help the automaker reach a goal of shedding 30,000 blue-collar jobs.

.......GM had more than $20 billion on hand at the end of 2005, but lost $10.6 billion last year because of high labor costs and sluggish sales.

GM has sold other pieces in recent months, letting go of stakes in Suzuki and Fuji Heavy Industries.....

GMAC was affected by GM's lowered credit rating. It would soon have become unprofitable anyway, because it could no longer borrow money at a favorable enough rate to offer car loans at an attractive rate and still maintain it's previous profit margin, when it had the ability to borrow money cheaper. GM has no profit engine to offset losses in it's car business, with GMAC sold....

Quote:

http://www.bloomberg.com/apps/news?p...uIGZw&refer=us
.....GMAC sold $15 billion of loans in 2005, 50 percent more than the past two years combined, Krell said. More than two-thirds of the company's debt is backed by collateral, compared with 35 percent in 2001, according to Krell.
[...]
The two combined have about $420 billion in debt, according to regulatory filings, almost as much as the $440 billion owed by Brazil, the most indebted nation among emerging markets.
Debt originally sold as investment grade by GM and Ford is now high-yield, high-risk at Standard & Poor's, Moody's Investors Service and Fitch Ratings........

Quote:

http://www.consumeraffairs.com/news0..._industry.html

......GM spent $5.2 billion in 2004 to provide health care to about 1.1 million employees, retirees and dependents. The company suggests that the bill might rise 7.7 percent to $5.6 billion this year. That amounts to approximately $1,525 per vehicle before GM even begins to manufacture anything..........

....and here come $8000 cars from China......

Quote:

http://www.businessweek.com/bwdaily/...0195_db016.htm

China is closing the quality gap and building a base of low-cost suppliers that could eventually allow it to unleash inexpensive, well-made cars on the West.
And because local production capacity of 3 million vehicles a year is currently outstripping demand by about half a million vehicles, there are already a lot of wheels looking for a garage. "It's inevitable," says Mark LaNeve, chief of sales and marketing at GM. "They'll follow the example of the Koreans and Japanese."

Quote:

http://msnbc.msn.com/id/14409579/
By Bernard Simon in Toronto
Updated: 7:12 p.m. ET Aug. 18, 2006

Ford plans to slash its North American output for the rest of this year, with temporary shutdowns at 10 assembly plants, in a dramatic effort to speed up its turnaround plan, reduce inventories and improve the trade-in values of its vehicles.

The 103 year-old, family-controlled carmaker has come under fire in recent months for not acting as decisively as its Detroit-based rival General Motors to reverse its declining fortunes in a ferociously competitive market.

Ford said that fourth-quarter production would tumble by 21 per cent, or 168,000 vehicles, compared to a year ago. Third-quarter output will be 3 per cent lower......

Here is an article that will help us to transition over to an examination of the prospects for the housing/real estate industries.....look at what massive job losses do to a market, Danville, IL. Look at the absurd comparison to Cali and Miami housing prices.....

Quote:

http://www.usatoday.com/money/econom...me-sales_x.htm
By Noelle Knox, USA TODAY
The loss of manufacturing jobs helped drive down home prices in 26 metro areas between April and June compared with the same period last year, the National Association of Realtors said Tuesday.

That's 10 more areas than in the first quarter, and it spotlights how joblessness in industrial states such as Illinois, Michigan, Ohio and Indiana is rippling through housing markets.

The hardest-hit this year: Danville, Ill., where prices at which existing homes were sold fell 11% in the second quarter after a 12% drop in the first quarter.

CHART : Prices in more than 100 metro areas

General Motors (GM), General Electric (GE) and Hyster (NC), a maker of forklifts, were among the companies to close plants in Danville, leaving behind hundreds of unemployed residents. The median price for a home has fallen to $65,200 — the cheapest in the country.

The exodus of auto, textile and other factory jobs has a direct effect on home prices. People leave town to look for work, boosting the supply of homes for sale. Others sell their homes because they can't keep up with the mortgage. At the same time, foreclosure rates in these cities are among the highest in the country, and banks are quick to cut prices to get the homes off their books.

"There were a lot of divorces, a lot of single mothers — all they could do is refinance their house or put it on the market and let it go cheap," says Jerry Urich of Century 21 Home Team Realty in Danville.

Still, nationwide there's no sign of any bursting real estate bubble......

Quote:

http://www.usatoday.com/money/econom...etroprices.htm
Median home prices in selected metro areas
Metro area.................Median price Q2 2006..Change from 2005

Danville, IL.....................................$65,200..-11.2%
Decatur, IL.....................................$85,300...-1.7%
San Diego-Carlsbad-San Marcos, CA..$613,100....1.2%
San Francisco-Oakland-Fremont, CA..$751,900....3.4%
San Jose-Sunnyvale-Santa Clara, CA.$748,200....0.4%
Sarasota-Bradenton-Venice, FL.........$350,900....0.2%
Youngstown-Warren-Boardman, OH-PA...$78,700...-5.1%

Here's a letter from the mortgage insurance assoc., MICA, after they become alarmed about the risk that they are facing. They sold too many cheap mortgage insurance policies on loans that are of very low quality. Huge numbers of first time buyers with no money for downpayments were approved for loans.

Quote:

http://72.14.209.104/search?q=cache:...s&ct=clnk&cd=1

Hon. John M. Reich
Director
Office of Thrift Supervision
1700 G Street, N.W.
Washington, DC 20552

Dear Sir or Madam:

The Mortgage Insurance Companies of America (MICA) has long been strongly supportive of the banking agencies' work to ensure appropriate prudential standards for mortgage risk. Mortgage insurers of course have all of their risk concentrated in this area, and we are deeply concerned about the potential contagion effect from poorly-underwritten or unsuitable mortgages and home-equity loans. We hope the agencies will soon finalize the draft guidance released last December on nontraditional mortgages [70 FR 77249], in part because the most recent market trends show alarming signs of ongoing undue risk-taking that puts both lenders and consumers at risk.....

......• The most recent data available from a survey conducted by the National Association of Realtors (2) shows that first-time homeowners - 40% of all borrowers in 2005 - had an average down payment of only 2% on homes costing $150,000, but 43% of these homeowners had no down payment at all....

.........MICA has noted that industry practice did not change as significantly as required following the final guidance in 2005 on home-equity loans. (7) Although the non-traditional guidance is now only in draft form, one would have expected a far slower growth in industry reliance on non-traditional products in anticipation of final standards with far-reaching market impact. The fact that this did not occur reinforces the suggestion in our earlier comment letter (8) that the final guidance be accompanied by clear language regarding not only consistent enforcement by the agencies, but also clear penalties for those who disregard it.

We would be pleased to provide additional background on the findings noted above or any other market analysis that would be of assistance as your agencies finalize the nontraditional mortgage guidance.

Sincerely,
Suzanne C. Hutchinson signature

The nation's largest mortgage bank sends courtesy warning letters to it's "interest only" ARM customers:

Quote:

http://www.baltimoresun.com/business...te-headlines-1
Interest-only loans may start cheap, 'reset' scary
Originally published August 18, 2006

...... To head off potential problems, the largest mortgage originator in the United States, Countrywide Home Loans, quietly has begun sending out letters to thousands of borrowers who have been making only the minimum payments on the company's popular "PayOption" adjustable-rate mortgages.

The letters explain that "this is an early message to alert you that, based on your current payment trends and potential future interest rate changes, the monthly payment you will be required to pay may increase significantly."

A model letter provided to me by Countrywide includes this hypothetical example of what could be ahead for a California homeowner currently making only minimum payments monthly on a $402,000 loan.

The current full interest rate on the loan is 7.6 percent, but the borrower has been paying just $1,348.47, far less than what's needed to fully amortize the mortgage over its 30-year term.

If the loan reset at today's rates, the letter explains, the full payment required would be $2,887.50 - more than double what the homeowner has gotten used to paying. Future reset rates could be even steeper, making the potential payment crunch much worse. ........

Quote:

http://www.dfw.com/mld/dfw/news/15265587.htm
Posted on Sun, Aug. 13, 2006

D.R. Horton has strategy for recovery

By MITCHELL SCHNURMAN
STAR-TELEGRAM STAFF WRITER

We know how D.R. Horton deals with success: It racked up more than 100 consecutive quarters of higher revenue and profits and became the nation's No. 1 home builder.

Now we'll see how the Fort Worth company handles adversity.

It won't be pretty, it won't be subtle, and it won't be alone.

In an extraordinary call with analysts last month, Chief Executive Don Tomnitz and several executives laid out Horton's strategy for retrenchment after the company reported its first-ever decline in business. The call was unusual in its length, detail and candor, and the approach was quite a counterpoint to RadioShack's bashful Julian Day......

.....A few moves are reminders that the big picture always matters. Even as Horton dumps lots and slashes margins, it's looking to pick up choice property for a bargain and choosing to wait out the slump in some primo neighborhoods like Northern Virginia.

The takeaway is that Horton is on the case big-time, moving urgently on multiple fronts, and it's spreading the pain.

"Our belief is: It is better to overreact and overcut than it is to underreact and undercut," Tomnitz said, according to a transcript of the July 20 call. "Every time we've gone into a downturn in the home-building industry, they've always been longer and deeper than we've all imagined, so we're preparing for the worst."

Horton's response is worth examining, because the company has been a sterling performer for three decades, and it has been prepping for this day for years. Horton diversified its business -- it builds homes in 83 markets in 27 states -- to insulate it from regional slowdowns.

It has also anticipated the housing bubble bursting, saying a downturn could work to its advantage. With its buying power, landholdings and deep pockets, the company expects to pick up market share and perhaps some distressed competitors during a prolonged slump.

Those plans are being tested.

Let's note, however, that Horton is hardly in danger. For the nine months that ended June 30, home-building revenue rose 16 percent to $10 billion. Net income increased 5 percent to $955.6 million. Those are killer numbers.

Horton kept the pedal to the metal on home building, even as experts warned about a growing bubble, and sales stayed strong until recently. In the first quarter of the current fiscal year, sales were up 19 percent; they rose nearly 10 percent in the second quarter; May and April sales were both stronger than the year before.

Then, Tomnitz said, "June absolutely fell off the Richter scale for us."

The problem is too many homes and too few buyers who can afford them, as builders nationwide have gone on a construction binge and prices escalated to dizzying heights. Horton's sale orders for the quarter were down 4 percent, after years of quarterly growth in double digits.

Twenty-nine percent of Horton buyers walked away without closing their deals in the quarter, the highest bust-out rate in company history.

Horton responded by canceling option contracts for more land, eating the earnest money and other fees. It took a $57 million write-off in the quarter, primarily because of the land deals. More important, it slashed its earnings guidance by more than 30 percent for the fiscal year that ends in September.

Profits will be squeezed, because Horton will have to give more incentives to move homes; it expects to cancel more land contracts; and its average home price is falling.

Horton's stock price, on a tear for five years, has fallen 43 percent in 2006.....

.....Horton had 396,000 home lots, 43 percent of them secured through options. It plans to reduce that to 340,000 and get a 50-50 mix of lots owned and optioned.....

....Tomnitz said framers and plumbers will have to get used to making less per hour than they did last year, which prompted an analyst to ask whether it was reasonable to squeeze their "thin" margins......

......Some Horton markets are doing well; Texas sales increased 20 percent in the quarter, and Arizona was up, although a slowdown is under way there. California, Horton's biggest market, had the biggest decline in sales, 25 percent. Florida fell almost as much, and Colorado and Nevada both declined by double-digit rates.

The biggest problem, in Tomnitz's view, is affordability. Prices have climbed too high, and wage growth isn't close to matching it. As a result, too many new homes are sitting in the pipeline.

Horton has weathered other downturns, including the Texas real-estate bust in the 1980s, and he says the company will adjust.

"The beautiful thing about our business is we can redesign our product and pull cost out of it and make it smaller," Tomnitz said. "And in three to six months, we're right back out there in the marketplace with a more-affordable product."

Sounds smart and realistic, with one caveat: Businesses are usually tripped up by problems they don't foresee.

What happens if too many Horton markets crash at the same time?
817-390-7821 schnurman@star-telegram.com

Well, there you have it. The nations largest automaker went from, just 12 months ago, holding $10 billion in cash, to experiencing diving auto sales, huge losses, and the loss of the $2.2 billion annual profit from it's auto loan division, GMAC. Combined, GMAC & Ford owe $440 billion....as much as Brazil.

The nation's largest homebuilder, D. R. Horton, has seen, after racking up 100 consecutive quarters of healthy profits and growth....it's first reported quarterly losses, and it is in 83 US housing markets and commented that

Quote:

May and April sales were both stronger than the year before.

Then, Tomnitz said, "June absolutely fell off the Richter scale for us."

After 3 manufacturing plants closed at once in Danville, IL, average housing selling price dropped to $65,200. The good news is that the average home price in San Francisco Bay Area is $751,900....

So....it looks like the auto and housing industries are "done" and prices of homes in most markets are suddenly stangnant or retreating. Nickel hit a record price of $29,100 per 2200 lbs. this week, double the price of 8 months ago, with two days of world consumption currently stocked in warehouses around the globe, oil holds stubbornly above $70/bbl, and there is plenty of evidence that the US leaders plan to use pre-emptive military intervention to "manage" raw materials and WMD. The "evidence" is only as far away as the quote below, in my sig:

Quote:

http://news.google.com/news/url?sa=t...6-6.html&cid=0
....."Leaving before we complete our mission would create a terrorist state in the heart of the Middle East, a country with huge oil reserves that the terrorist network would be willing to use to extract economic pain from those of us who believe in freedom," Bush said.....

Maybe we aren't ready yet for this discussion. Maybe we should postpone it for a year....until our economy and our dollar are flat on their asses....

aceventura3 · 08-20-2006, 07:07 AM

Quote:

Originally Posted by host

We live in a world of fiat money and fractional reserve banking. "Money" is created out of thin air, via debt creation.

I think the basis of your argument as outlined in the above quote is flawed.

Our "fiat" money has value. The collective market place determines the value of our money. True the value fluctuates and historically there has been inflation, devaluing the dollars purchasing power for some goods and services, but inflation has been more than offset by productivity gains. Think about it 100 years ago, the average person would have worked 60 hours a week just for food, shelter, clothing, a few beers, and perhaps a horse. Today the average American works about 40 hours per week, gets three weeks vacation, has two cars, 4 TV's, 2,000 sq. ft. home, eats out twice a week, etc, etc,etc.

Productivity creates "money".

Willravel · 08-20-2006, 07:20 AM

Quote:

Originally Posted by aceventura3

I think the basis of your argument as outlined in the above quote is flawed.

Our "fiat" money has value. The collective market place determines the value of our money. True the value fluctuates and historically there has been inflation, devaluing the dollars purchasing power for some goods and services, but inflation has been more than offset by productivity gains. Think about it 100 years ago, the average person would have worked 60 hours a week just for food, shelter, clothing, a few beers, and perhaps a horse. Today the average American works about 40 hours per week, gets three weeks vacation, has two cars, 4 TV's, 2,000 sq. ft. home, eats out twice a week, etc, etc,etc.

Productivity creates "money".

The problem is that the market determins what the dollar is worth versus the euro or yen, but it doesn't actually give the dollar worth. What *should* give it worth is the gold or silver backing somewhere. The idea of the dollar is that it represents a bank note laying claim to precious metals heald by the government. If the government no longer backs to dollar, the dollar no longer has worth. If the dollar doesn't have backing, then the US can just simply print money from thin air and that screws up the entire world monitary system. There is a finite amount of worth in the world. If there is more currency in the world than there is worth, then the whole thing collapses and we go back to bartering for coon skins again.

aceventura3 · 08-20-2006, 08:30 AM

Quote:

Originally Posted by willravel

The problem is that the market determins what the dollar is worth versus the euro or yen, but it doesn't actually give the dollar worth.

It is true that the government declared the dollar to be legal tender. However, it is the market that determines if it has value. The intrinsic value of a dollar is virtually zero and it is the market that has faith that the dollar has value as an exchange medium. In one respect what you say is true, but I stand on my point that the market determines the value of a dollar.

Quote:

What *should* give it worth is the gold or silver backing somewhere.

Why?

There is no inherent reason that exchanges in any market be backed by gold or silver.

Look at the EBAY market. That kind of market could easily get to a point where no dollars are ever exchanged. If the participants in that market wanted to exchange good and services in PayPal credits, why would those credits need to be backed by gold? In my view there is no need.

Quote:

The idea of the dollar is that it represents a bank note laying claim to precious metals heald by the government. If the government no longer backs to dollar, the dollar no longer has worth.

I think the market determines if the dollar will have worth as an exchange medium. When I go to a casino they give me chips as an exchange medium. those chips are not sanctioned by the government but certainly have value. The value is based on the faith I have in the "casino" market. As long as I am in that market the chips have value. I agree that if the government created a new currency, the dollar would be devalued. The full faith and backing of the US government gives the dollar credibility.

Quote:

There is a finite amount of worth in the world.

Says who? We have not come close to taping the full potenetial of human knowledge and productivity. As long as we can do things better and gain more knowledge there is no limit to the "worth in the world".

Quote:

If there is more currency in the world than there is worth, then the whole thing collapses and we go back to bartering for coon skins again.

True if the government prints money with no limit we would have hyper-inflation. But hyper-inflation doesn't mean the value of goods and services disappear, its just that everything costs more relative to that currency. That then becomes a hedging game, because in a hyper-inflation enviroment the people who have hard assets wins, but converting those assets to other usable services or assets becomes a challenge.

Willravel · 08-20-2006, 09:01 AM

Ace, let me put it this way:
Have you ever been to Vegas? I love Vegas, espically the casinos. I am a good roulette player and a damn good baccarat player. I always star with $5,000 when I start, and I always try to leave with $10k or more.

When you go into a casino, you can't just put cash on the table, though. You have to get it changed over to chips, small things that represent your money, but can only be used in the casino. I like to get $500 chips, because they take up less room in my pocket, and they look a bit flashy. At the end of the night, I can simply go back to the booth, and exchange my chips for money again.

The US government did the same thing once upon a time. In order to get the US econemy booming, the government set up it's own monitary system. They traded a bank note, the dollar, for a certian worth in bullion. That means that the dolalr is an IOU to anyone who has the dollar. The doller itself is worth a few cents (I've heard around 3 cents), but it's backing is where the real valuation is in the gold backing. Now, however the Federal Reserve Bank is actually a private company. They are not required to back the money at all. This means that when I pull a $10 bill out of my pocket, it's actually worth $0.03. People may think it's worth something, and that misunderstanding is the think thread that's keeping this whole thing together, but they're dead wrong. Why do you think so many people are investing in gold lately?

In a casino, I can cash in my chips at the end of the day. The worth of the chips can be backed up. My money can't be cashed in because there's nothing to back it up. It's worthless.

*If* everyone decided that it was time to change to a different system, then that would be fine. We'd all trade in our dollars for something else, and the whole country would change. The problem is that there isn't a complete conversion going on at once. It is a slow slide from a backable doller to a hyper inflated paper money system. That transition means that our econemy is in a very dangerous spot.

If you ask me, now is the time to buy real estate and invest in gold. Any little thing can set this off, and you'll want to own something of worth that isn't printed on paper.

aceventura3 · 08-20-2006, 09:48 AM

Quote:

Originally Posted by willravel

My money can't be cashed in because there's nothing to back it up. It's worthless.

The dollar is legal tender and can be used to discharge debt. That is a value, and therefore it has worth. Can we at least agree on that point?

If you really think the dollar is worthless or some will be, now is the time to accumulate as much debt as possible, so the debt can be paid in worthless dollars in the future.

Willravel · 08-20-2006, 09:57 AM

Quote:

Originally Posted by aceventura3

The dollar is legal tender and can be used to discharge debt. That is a value, and therefore it has worth. Can we at least agree on that point?

Sort of. I mean, yes, if I take a $5 bill to the drug store I can get some toothpaste, but it seems more like I'm tricking them than having a fair transaction with them. If something is a lie, but everyone thinks it's truth, does it cease to be a lie?

host · 08-20-2006, 10:01 AM

Quote:

Originally Posted by aceventura3

I think the basis of your argument as outlined in the above quote is flawed.

Our "fiat" money has value. The collective market place determines the value of our money. True the value fluctuates and historically there has been inflation, devaluing the dollars purchasing power for some goods and services, but inflation has been more than offset by productivity gains. Think about it 100 years ago, the average person would have worked 60 hours a week just for food, shelter, clothing, a few beers, and perhaps a horse. Today the average American works about 40 hours per week, gets three weeks vacation, has two cars, 4 TV's, 2,000 sq. ft. home, eats out twice a week, etc, etc,etc.

Productivity creates "money".

Written in 1859, IMO, this is one of the best articles on "value" vs. "price", in realtion to "money".

Quote:

http://www.mises.org/books/org_of_debt/Chap11.aspx
Organization of Debt into Currency and Other Papers
by Charles Holt Carroll
Previous Chapter * Next Chapter
Table of Contents

Chapter 11
On the Nature of Commercial Value

(Reprinted from Hunt's Merchants' Magazine and Commercial Review, XL (Mar., 1859), 309-13.)

I propose to offer some remarks upon the nature and influence of commercial value, with especial reference to the term "measure of value," so frequently employed in economical science. The theory of this term, as commonly understood, I conceive to be the source of more practical mischief than any other theory of science.

There is no common standard or measure of value, nor can there be any, for the reason that no commodity can be found to represent value that is not liable itself to variation in supply and demand, and consequent fluctuation in value. Value is in its nature relative, involving a comparison between two or more things in respect to the labor, skill, and capital applied to put them in form or position to satisfy some want or desire, and also in respect to the supply of and demand for them; the value of each being in the compound ratio of its utility and its scarcity. Value is reciprocal between money on one side, and all other property on the other side, as well as between different properties, and is necessarily fluctuating. It can never be fixed and absolute, but must vary continually with the demand and supply of all exchangeable things, gold and silver included, whether coined or uncoined.....

......... All we can say of value, therefore, is indefinite; it is that money is cheap when and where commodities are dear, and commodities are cheap when and where money is dear. The relative value of money here and elsewhere can be determined only by the comparative average price of commodities. An increase of commodities thrown upon the market, without a corresponding increase of money, will always enhance the value of money by creating an additional demand for it; less money will then buy more of commodities; that is, their price falls. An increased amount of money thrown upon the market, without a corresponding increase of commodities, will always enhance the price of commodities; more money must be given for them, because its relative value falls.

Now, the difficulty in this matter lies in mistaking price for value—they are widely different things. Value is the power of property and labor to exchange for other property and labor, and may remain the same under the most extreme alteration of price. If we double the supply of money upon the market, other things remaining in supply and demand as before, the prices of all property will double in the average. In this case money falls in value one-half—two ounces of gold must be given in exchange for commodities which could have been obtained before for one ounce; there is no alteration in the value of other things, because their relation to each other remains unaltered; they exchange for precisely the same quantities of each other as before; the alteration is wholly in the value of money itself.

Price is the power of property and labor to exchange for money only. Obviously, therefore, if any commodity becomes scarce in relation to the demand, either by a falling off in the supply, or by an increase of demand, its power to exchange for money increases in proportion; its price rises accordingly. Allowance must be made for commodities that admit of substitution; thus, wheat, for example, might fall off in supply one-half, and the consequent rise of price would probably turn the consumption to a great extent upon Indian corn, rye, rice, &c, which would rise in price and value also, and we must estimate an average rise of value on the whole supply of cereals; still the general rule holds good; if at any period an ounce of gold and 100 pounds of copper were equivalent values, and the supply of copper in proportion to the demand should subsequently diminish one-half, we must then expect to give two ounces of gold instead of one for 100 pounds of copper. This is a rise in the value of copper, because its relation to other commodities is changed, and it is a rise in price, because it is an alteration in relation to money likewise; but, as I have before stated, if the same disproportion between money and copper should be caused by a double supply of money, we must still give two ounces of gold, instead of one as before, for 100 pounds of copper—the cause is different—the effect the same. Copper would rise in price 100 per cent without any rise of its value, while gold would depreciate in value one-half, or 50 per cent. This double supply of money increases the price of all other commodities in the same ratio—100 per cent—for a fall in the value of money is only another mode of expressing a general or average rise of prices.

Here let us clear away an obstruction to the proper understanding of this matter, namely, the notion that the rate of interest expresses the value of money; nothing can be farther from the truth. So far as interest expresses anything in relation to money it is the opposite of its value, for it happens, all the world over, that when and where the rate of interest is high, the value of money is low. Everyone whose attention is called to the subject will observe that money—real money—always runs away from countries and districts where interest is high to those where interest is low. Following the law of value, money flows from the cheap to the dear market, like every other commodity. Thus it leaves California, where interest is 24 to 30 per cent per annum, for New York where it is 6 to 9 per cent, and leaves New York for London, where it is 3 to 4 per cent, and London for Hamburg, where it is 2 per cent, and so on, running always counter to the rate of interest.

I have been surprised that the plain contradiction of the common notion of the value of money expressed in this fact has not attracted public attention. I think I have never heard or seen any public mention of it, except once in the sermon of a philosophic preacher.

J. Stuart Mill speaks of the 'Value of money" when used to denote the rate of interest, or the rate of interest to denote the value of money, as a misapplication of terms; and takes much pains to show "how great an error it is to imagine that the rate of interest bears any necessary relation to the quantity or value of the money in circulation." While agreeing with him as to the misapplication of terms, I differ from him in regard to the relation between the rate of interest and the value of money. A high rate of interest and low value of money would not accompany each other so constantly by mere accident; there is a relation between them, but in the inverse ratio; thus, whenever money or the currency is cheap or expanded in volume, general prices are high—dear prices and cheap money are synonymous terms. Now look at California; she can neither eat, drink, nor wear her gold—its value to her is almost entirely for export; she must sell it, and this she cannot do without sustaining the price of commodities above their average elsewhere. No one sends merchandise intentionally from New York to California, when he can obtain as much gold, that is, as much price, for it in New York. California must buy her imported commodities at the high prices resulting from cheap gold. In this respect California is like a foreign country to the Atlantic States; we buy her gold as we do the gold of Russia or Australia, with our commodities—our commodities are her imports. The high prices and the general appetite for gold throw a constant excess of imported merchandise upon the California market, and must continue to do so while gold is a native production that she must sell. She will have more foreign commodities than are necessary for her consumption; the high prices for surplus merchandise are a constant motive to speculation; commodities are forced upon the market at a tempting difference below the regular selling price to consumers; the surplus merchandise is advanced upon by commission merchants in acceptances that are discounted by bankers; it is sold and resold by and to speculators for notes that are also discounted; finally, no people in the world are more involved in debt abroad and among each other, in proportion to capital, than the people of California. Nearly all the gold they can raise comes away, leaving them in debt besides. Cheap as it is, and must be, naturally, they cheapen it still more by using bankers' credits, convertible on demand, as equivalent in value to gold and silver, thus adding to the real dollars of their currency fictitious dollars of debt; so they part with their money and do business with debt. It is debt that creates the hungriest demand for money—the most pressing necessity for loans—and it is therefore debt, in relation to capital, that determines the rent of capital or rate of interest............

....... Such is the nature of a cheap currency, whether from the native abundance of gold and silver, or from the volume of bank notes and credits; it is always accompanied by debt, instability, and a high rate of interest. Wherever gold and silver are cheapest they will be sought and found by numerous customers, and bought with all the commodities of the world, while that cheapness remains. When their supply becomes so far exhausted as to raise their value above merchandise, that is, when the prices of merchandise fall below the value of gold and silver, and it becomes a losing business to exchange merchandise for them, the business stops of course, but this never happens in a gold-producing country without a financial revulsion. Such is the attractive power of gold, and so powerful the impulse by which commodities rush to it from points near and distant in every direction, and so great is its tendency to sustain prices, that the inflowing stream is seldom checked, and the market of the gold country never fairly yields, until it breaks down altogether under a glut of merchandise in a general stampede of prices, followed by widespread bankruptcy and distress...........

....... It follows that a community gains nothing by mining gold and silver; it is labor lost, excepting so far as it supplies plate, trinkets, and other ornamental trifles in exchange for other things—a very doubtful advantage. That country thrives the most which buys the precious metals with the proceeds of its labor bestowed upon the widest and best cultivation of its soil, and upon branches of industry natural to its condition, which promote health, and a vigorous and intelligent population. That people are the most prosperous and happy who keep the precious metals valuable in comparison with other commodities, by the most extended use, and by a constant relative increase of commodities, to secure the sale of commodities and keep a constant demand for labor to replace them. Every ounce or dollar of gold thus obtained is a gain of capital; the operation is selling goods for money, opposed to debt; it increases production, secures a steady export trade, employs navigation, and adds to the nation's wealth.

It is a mistaken policy for any community to increase its currency, except from the absolute necessity of importing the precious metals in payment for balances from abroad which cannot otherwise be remitted; for the increased volume of currency increases prices without increasing values, the real effect being a fall in the value of gold and silver, and the inevitable consequence is a decline of the exports and increase of the imports of merchandise, the imports coming more or less in competition with home industry. This result follows the home production of gold; but the most suicidal policy is to increase the currency in convertible "promises to pay," which substitute debt for money, having all the injurious effect of degrading the value of the currency, with the additional evil of increasing the obligations of debt in fictitious values, which, on the demand of real dollars, cannot be paid. Bankruptcy is the result, as we witness in every contraction of bank loans..........

In our US "system", we (the vast majority who "work" for their income) are compensated for our labor with paper "notes" that are to be accepted as payment for "all debts, public and private".

In just the last six years, with no corresponding, appreciable rise in the income of the vast majority, we have experienced a rise in the prices of the following:
Gold, one oz. (2001= $257, Aug. 18, 2006= $610)
Silver, one oz.(2001= $4 Aug. 18, 2006= $12 )
WTI Oil, bbl <a href="http://www.bry.com/index.php?page=oilprices">(2001= $27</a> Aug. 18, 2006= $71 )
Nickel, one ton <a href="http://www.thecopperlink.com/services/metal-prices/prices/se_me-pr_pr_index.php.en?grafik=Nickel&suche_datum=02.01.2001&suche=vor">(2001= $7000,</a> Aug. 2006= $30,000)

Average Cal. Home Price, State wide, 2001=

Quote:

http://www.dqnews.com/AA2001Bay1101.shtm
The median price paid for a home statewide was $235,000 in October. That was the same as September and up 9.0 percent from $215,500 for October a year ago, DataQuick reported.

Average Cal. Home Price, State wide, 2006=

Quote:

http://www.dqnews.com/RRCA0806.shtm
The median price paid for a home last month was $475,000. That was down 0.6 percent from June's record $478,000, and up 5.3 percent from $451,000 for July a year ago.

<img src="http://mwhodges.home.att.net/exchange.gif">

The description of "the problem" in my OP is clear, I think. The high probability potential for the US is that it will be less likely, in a closer approaching time period than I could have imagined, until very recently, that there will be sufficient wealth available in the country to persuade the rest of the world to accept $70 US for a bbl of sweet crude oil, $1.11 US, for a Canadian dollar,
$1.27 US, for a euro, $610 US, for an oz. of gold....or, in terms of the dollar, anything close to today's bargain prices, for any of the above.
The cost to finance the twin US debts, will quickly become unsustainable, and US consumers and the government will be unable to afford the current standard of living and purchasing, and that will cause examination of the alternative options available to offset that newly recognized "lack of wealth" effect. My concern that the temptation to do something will come late....out of desperation, when global competitors/adversaries are much stronger than they are now, and the US military infrastructure is less well maintained....more worn out...less able to project force with a high probability outcome of a successful "first strike."
willravel, I think that real estate will be a terrible investment, going forward, because it is highly illiquid, it is highly proabable that in the vast majority of US markets, it will not increase in value, and it has high carrying costs, i.e., property taxes, insurance, and selling and conveyance fees.

This was not true when say, a 100 percent financed, $500K property could be "held" for maintenance of a 3-1/2 percent interest only mortgage....which was
a $17,500 annual interest payment, and say.....$12,000 in annual property tax, insurance, and upkeep costs, sweetened by 10 percent annual appreciation.....or a $105K 2 year gain, then sold with the cost of $38K in commissions/fees, $35K for 2 years of mortgage payments, and $24K total paid for taxes/insurance/upkeep..... you could still net, at minimum, $8000, when you sold....you lived cost free for the two year ownerhip period, and in, good market, or if you were one of the army of folks who got a realty agent license, you also kept some or all of the $38K in selling costs.

Not anymore....which is the reason that real estate is beginning to implode.

aceventura3 · 08-20-2006, 04:26 PM

Host,

It seems you fall into the trap the author of the article you cite states, that there is no common standard for value. You have concerns about the value of the dollar, and concerns about the value of the dollar as an exchange medium. Yet the author of the article you cite states that value is relative and that the value of money is on aggregate measured by the avarage monetary value of commodities. Or as I stated the market.

Quote:

Originally Posted by willravel

Sort of. I mean, yes, if I take a $5 bill to the drug store I can get some toothpaste, but it seems more like I'm tricking them than having a fair transaction with them. If something is a lie, but everyone thinks it's truth, does it cease to be a lie?

I mean - if you get a 30 year mortgage on a house, the law says the debt can be discharged in dollars. If you work 40 hours for me in exchange for payment, the law says I can pay you in dollars. If I eat a meal at a resaurant and they give me the bill, I can settle the obligation in dollars. If you go to the drug store with $1 billion dollars for tooth paste, the drug store is under no obligation to take your dollars in exchange for the tooth paste. They are free to make the choice.

Given the amount of debt, in American dollars, in the world - it is in no one's interest to let the dollar collapse. Every legitimate participant in the world market wants there to be stability in the dollar, about 3% infaltion is the sweet spot.

08-19-2006, 10:50 AM	#1 (permalink)
host Banned	Why Oil, Gold, Silver, Nickel, and the Canadian Dollar, Cost More I've advocated in a number of posts, a proposal that the U.S. government issue a sudden ulitmatum to the other nuclear powers in the world, that they agree to disarm immediately, or the US will do it for them. We in the US, are running out of time, because over time, the purchasing power of the dollar is deteriorating, and will continue to do so....we are already past the point of no return. The rise in the value of the Canadian dollar is a harbinger of the diversion of purchasing power of two currencies that reflect the wealth potential in the respective countries. We live in a world of fiat money and fractional reserve banking. "Money" is created out of thin air, via debt creation. Every mortgage or loan that originates from a bank, is "new money". Banks create a debt instrument, the borrower signs it, the check that is issued is cashed against deposits that are only a tiny fraction of the amounts that banks are allowed to lend. If banks were only permitted to lend what was on deposit, minus an ample reserve against periods of heavy withdrawals (Y2K fears were a recent example), the line for loans and mortgages, and the interest rates, would skyrocket, growth would slow, and, considering that we "enjoy" a negative savings rate, even in a recent climate of high growth, where would the savings deposits come from to satisfy the loan demand, and still keep interest rates so low? We currently live in a country whose consumers borrow a billion dollars per day from the rest of the world, just to purchase oil at today's prices, and almost another $1.5 billion per day for everything else that we impost, vs. the much lower value of what the rest of the world buys from us. The federal government must also finance at least another billion dollars per day in new borrowing because it spends that much more than it collects in taxes and other revenue. Canada, on the other hand, exports more than 1 million bbls/per day of oil....mostly to the US, that it collects more than $70 million per day from, along with many other exported raw materials. The reason that US interest rates do not skyrocket due to all of the US borrowing, is because all of the dollars that Chinese and Japanese exporters receive in exchange for the goods that we buy, are purchased by the central banks of Japan and China with yen and renminbi (yuan), that are printed out of "thin air", exchanged for dollars that companies like Toyota receive from the US, and then are used by the Japanese and Chinese central banks to purchase T-Bills issued by the US treasury to finance our huge borrowing. The Chinese and Japanese print their paper money to prevent the value of it from increasing, the way the Canadian dollar, and oil, and gold, etc. have increased, because they do not want the goods that they make and export, to become less affordable in the US, their biggest customer. If the US experiences an economic slowdown, and/or the value (purchasing power) of the dollar continues to drop to where average US consumers lack the ability to purchase both energy (gasoline, nat. gas, electricity) and consumer goods from Wal-Mart or Toyota.....but continues to run an $800 billion trade deficit (due to even higher prices for Canadian oil, adjusted for the "scam factor" of the "thin air" yen/yuan prop up of the dollar), and a big federal budget deficit, due to less tax revenue from lower corporated earnings, and continued GWOT expenses.....there will be less dollars coming to Chinese and Japanese exporters, for the central banks of those countries to print paper money to buy....and less US debt/T-Bills purchased by those two country's central banks. When that happens, the only way to attract new lenders, will be to pay higher interest rates to those lenders. Oil exporters like Canada, Saudi Arabia, Venezuala, and Iran, already require more and more paper dollars that are propped up by yen and yuan that are printed out of "thin air", in exchange for a resource of real value.....oil, than ever before. These countries are either producing less oil than a year ago, even with the incentive of record high prices per bbl....in dollars, than ever before, or in the case of Canada, at a higher expense because of the higher cost of turing oil sands into petroleum, vs. pumping it from naturally pressurized underground pools of oil. Even with less demand that an economic downturn will trigger, every new bbl sold will cost more to replace and bring to market, and only higher US interest rates will make it attractive to oil producers to accept even $70 per bbl, next year, for their oil. Who is taking the risk by buying US T-Bills at ridiculously low interest rates now, considering the likelihood that US dollars will devalue at a greater rate than the interest paid on the T-Bills? It doesn't seem to be the central banks in Japan and China....they bought the T-Bills with dollars that they bought from exporters in their own countries, with yen and yuan that they printed out of....."thin air". This isn't new....and it isn't "news"....Japan has been engaged in this for more than ten years. China and Russia are growing richer as the US grows poorer. A visit to "Janes", on the internet will show you that the US nuclear arsenal and delivery capability is overwhelming, and that China has less than 25 nuclear ICMBs, and that Russia is about to embark on an ambitious modernization program of it's degraded, negelcted, and antiquated, nuclear arsenal. The purchasing power trend for the dollar is in crisis. Even if you argue that it is in "slow motion" fall, consider that when the Euro debuted, just six years ago, a dollar bought 1.2 euros, and buys just .77 euros, now. Liberals pontificate with moral outrage to my proposal, that is starkly absent when it comes to their defense of abortion on demand. "Ohhhh noooo", they exclaim...."it is immoral to threaten or intimidate Russia and China into disarming, and attacking them with nuclear weapons if they refuse a US ulitmatum". Okay.....the dollar is imploding, trends in wealth flow and known military strategies of China and Russia indicate that they will upgrade their nuclear armament, and your plan to preserve a strong US defense capability and economy....is ??????? I'm waiting........

08-19-2006, 12:25 PM	#2 (permalink)
ubertuber spudly Location: Ellay	If the decline of the dollar relative to other currencies continued as far as you postulate... And if the maintenance of a certain size military pertained within that weakened economic world... Wouldn't that just make us the next Russia - with a large standing military we're unable to pay for and keep up, therefore making the US the next nightmare in terms of securing weapons, etc. that can no longer be maintained and controlled? __________________ Cogito ergo spud -- I think, therefore I yam

08-19-2006, 01:24 PM	#4 (permalink)
cyrnel Adequate Location: In my angry-dome.	I wish you guys wouldn't reinforce my phobias. Big changes seem inevitable, even if we last 20yrs longer. Will California be our first Ukraine? Hoping for encouraging words from those more familiar with international finance. __________________ There are a vast number of people who are uninformed and heavily propagandized, but fundamentally decent. The propaganda that inundates them is effective when unchallenged, but much of it goes only skin deep. If they can be brought to raise questions and apply their decent instincts and basic intelligence, many people quickly escape the confines of the doctrinal system and are willing to do something to help others who are really suffering and oppressed." -Manufacturing Consent: Noam Chomsky and the Media, p. 195

08-19-2006, 03:27 PM	#5 (permalink)
The_Jazz Asshole Administrator Location: Chicago	Ok, I really don't see how international monetary problems have anything to do with nuclear disarmament or how, if your plan was successful, disarmament would bring any sort of economic benefit or how the US could keep anyone from rearming. Remember the number of nations with nuclear capability. Off the top of my head, I count 11 (UK, France, Russsia, Belorussia, Ukraine, Kazakstan, N. Korea, India, Pakistan, Israel and Canada) with at least 3 others (Brazil, S. Africa and Germany) probably able to produce a bomb in a year should they so choose. If all 11 simulateously attack the US (which is the actual worst case scenario) in the face of forced disarmament, North America becomes uninhabitable. We don't lose a few cities (and since I live in Chicago - a probable target city - thanks for offering up my life in your hairbrained scheme), we lose everything except maybe some of the Aleutian Islands and some deep mineshafts. If Russia and China alone attack us, the same outcome is probable. If Russia attacks us alone, it depends on their targeting, but expect to lose not 4 or 5 large cities but more like every city with 100,000+ people. One rocket could potentially take out all of New England with multiple entry warheads. The Russian Rocket Corp is one of the few well-funded parts of their military, and it remains the elite assignment. Clearly you need to brush up on the Mutually Assured Destruction doctrine and what it's all about. Look, I'm all for monetary reform, but your suggestion is tatamount to trying to hold back the tide. There is no way in hell that it would ever work, and the best case scenario, as I see it, is an arms race that reinvigorates the military industrial complex. __________________ "They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - B. Franklin "There ought to be limits to freedom." - George W. Bush "We have met the enemy and he is us." - Pogo

08-19-2006, 04:14 PM	#6 (permalink)
Charlatan Getting it. Super Moderator Location: Lion City	Jazz, while Canada is nuclear power producing nation, we are nuke weapon free. While I suppose Canada could build the weapons if we wanted, it would not escape the notice of our neighbours to the south (or the rest of the world). Host: just for clarity... there is an aspect of Canada's wealth that you have lef t out. Indeed we are getting wealthier off of our oil and gas exports, and to a lesser extent our raw materials. Two things spring to mind: one, the oil and gas can't last forever and two, we ship raw materials out and pay more to bring them back as finsihed goods. Our manufacturing sector is in the shits. If we could process our own resources and sell them finished, at higher prices... that would be golden. Otherwise I don't disagree with your assesment of the econmomic situation (just the need to bomb the world's other nuclear powers). __________________ "My hands are on fire. Hands are on fire. Ain't got no more time for all you charlatans and liars." - Old Man Luedecke

08-19-2006, 06:05 PM	#8 (permalink)
The_Jazz Asshole Administrator Location: Chicago	Host, the fact that you're willing to sacrifice millions of lives in this scheme makes it a joke from the outset. Anyone in a position of power who proposed this sort of "fix" should be immediately fired or impeached (depending on the position) for it since such a thing absolutely abhorent. If we're going to continue this, I want to know that you are moving into harms way. If you're willing to sacrifice MY life for the sake of the dollar, you should be willing to give up yours too. Oh, move your family along with you, too. The fact that you actually seem to be taking this seriously makes me question your sanity. And before you start accusing me of being a liberal, please name a single nationally known leader who advocates this kind of position. I'd love to know who it is. By the way, I do conceed that we're in a deep hole financially and that we may even be past the point of no return. But for you to be blase' about deaths of millions is offensive. __________________ "They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - B. Franklin "There ought to be limits to freedom." - George W. Bush "We have met the enemy and he is us." - Pogo

08-19-2006, 06:37 PM	#9 (permalink)
cyrnel Adequate Location: In my angry-dome.	Host, I'll be very surprised if this isn't leading up to something completely different. It has crossed my mind that our military will become our final advantage in the next decade, but to think we as a society would collectively decide the nuclear option is rational seems unlikely. China seems to think we'll go the conventional route, if their buildup is any indication. If you're suggesting a first strike could happen as part of a sequence of managed events and responses by leadership I'd agree. That's entirely possible. I just don't believe we'll (the public) ever discuss it as other than hypothetical "war gaming." If we were to cross the threshhold and decide our mostly self-inflicted situation is justification to plan for and unleash first strikes then the winning side is not where I want to be. Slap me for even posting in this thing. __________________ There are a vast number of people who are uninformed and heavily propagandized, but fundamentally decent. The propaganda that inundates them is effective when unchallenged, but much of it goes only skin deep. If they can be brought to raise questions and apply their decent instincts and basic intelligence, many people quickly escape the confines of the doctrinal system and are willing to do something to help others who are really suffering and oppressed." -Manufacturing Consent: Noam Chomsky and the Media, p. 195

08-19-2006, 06:51 PM	#10 (permalink)
streak_56 who ever said streaking was a bad thing? Location: Calgary	We're our wealthiest when we're kids because we own nothing.

08-19-2006, 06:55 PM	#11 (permalink)
fresnelly Functionally Appropriate Location: Toronto	I don't see how a nuclear bomb solves anything for anyone. Misery all around. __________________ Building an artificial intelligence that appreciates Mozart is easy. Building an A.I. that appreciates a theme restaurant is the real challenge - Kit Roebuck - Nine Planets Without Intelligent Life

08-19-2006, 10:48 PM	#13 (permalink)
Ustwo Pissing in the cornflakes	Pardon me if I missread the OP but did host just propose war on the rest of the nuclear world? This is a modest proposal indeed, though he is no Jonathan Swift. __________________ Agents of the enemies who hold office in our own government, who attempt to eliminate our "freedoms" and our "right to know" are posting among us, I fear.....on this very forum. - host Obama - Know a Man by the friends he keeps.

08-19-2006, 11:49 PM	#14 (permalink)
Ch'i Artist of Life	Edit: Nevermind, heh. Last edited by Ch'i; 08-20-2006 at 12:53 AM..

08-20-2006, 09:01 AM	#19 (permalink)
Willravel ... a sort of licensed troubleshooter.	Ace, let me put it this way: Have you ever been to Vegas? I love Vegas, espically the casinos. I am a good roulette player and a damn good baccarat player. I always star with $5,000 when I start, and I always try to leave with $10k or more. When you go into a casino, you can't just put cash on the table, though. You have to get it changed over to chips, small things that represent your money, but can only be used in the casino. I like to get $500 chips, because they take up less room in my pocket, and they look a bit flashy. At the end of the night, I can simply go back to the booth, and exchange my chips for money again. The US government did the same thing once upon a time. In order to get the US econemy booming, the government set up it's own monitary system. They traded a bank note, the dollar, for a certian worth in bullion. That means that the dolalr is an IOU to anyone who has the dollar. The doller itself is worth a few cents (I've heard around 3 cents), but it's backing is where the real valuation is in the gold backing. Now, however the Federal Reserve Bank is actually a private company. They are not required to back the money at all. This means that when I pull a $10 bill out of my pocket, it's actually worth $0.03. People may think it's worth something, and that misunderstanding is the think thread that's keeping this whole thing together, but they're dead wrong. Why do you think so many people are investing in gold lately? In a casino, I can cash in my chips at the end of the day. The worth of the chips can be backed up. My money can't be cashed in because there's nothing to back it up. It's worthless. If everyone decided that it was time to change to a different system, then that would be fine. We'd all trade in our dollars for something else, and the whole country would change. The problem is that there isn't a complete conversion going on at once. It is a slow slide from a backable doller to a hyper inflated paper money system. That transition means that our econemy is in a very dangerous spot. If you ask me, now is the time to buy real estate and invest in gold. Any little thing can set this off, and you'll want to own something of worth that isn't printed on paper.