We are Out of Time! City of Hardin & surrounding area is now becoming a police state.
Franklin Street Properties Corp. closed on its purchase of a 252,613-square-foot office building at 3150 Fairview Park Drive in Falls Church, VA, from ING Clarion Partners LLC for $73 million, or approximately $289 per square foot.
By DAVE LINDORFF, Prison Planet
So now it turns out that the whole Troubled Assets Relief Program (TARP) was a flop or more likely a scam. Remember Bush Treasury Secretary Henry Paulson telling us last September that credit markets had locked up, and then, after half of the $750 billion that he extorted out of Congress was handed out to Wall Street firms, new President Barack Obama justifying the spending of the second half of the money because we needed to “get the banks lending again”?
Well, now Neil Barofsky, the special inspector general for TARP, is telling us that all that money, and another more than $2 trillion in loans, accomplished nothing. In an interview with Lagan Sebert, published in Huffington Post, Barofsky says, “We were told by Treasury that the purpose of the TARP fund was to increase lending. But we haven’t increased lending.”
Well yeah, that’s true. Just ask any ordinary working stiff. My little bank, the Harleysville National Bank here in eastern Pennsylvania, far from expanding lending, has been shutting down customer credit lines. As a bank manager told me, they were “reviewing all our equity lines” in light of declining property values (actually, property values in our area north of Philadelphia have remained pretty stable). In general, banks across the country have been canceling credit lines, closing credit card accounts on customers deemed risky—including small businesses—and making it very hard to get a new mortgage. (They’ve also been raising all kinds of fees, ripping customers off in other ways, but that’s another story.)
And that goes for the biggest banks that got billions of dollars in taxpayer bailout funds.
Barofsky has been trying doggedly to find out whatever happened to all that money of ours that was shoveled out to the banks, and as he reports, he’s been working not just without any help from the Treasury Department, but actually against the active resistance of Treasury, which he accuses of having tried to dissuade him from even looking into it.
“My biggest surprise,” he says, “is when we announced an audit (of TARP), Treasury went out of their way to say…it would be a big waste of time.” He says Treasury officials including Treasury Secretary Tim Geithner, claimed that it would be impossible to find out where the money went, on the argument that money is “fungible”—that is to say all money is the same. Of course this is a cynical and ridiculous assertion. If it were true, there would be no job for auditors, since all auditors do is look to find out where money went. (Imagine telling an IRS auditor that it is a waste of time auditing your books, because money is fungible!)
In any event, Barofsky has gone about his work, with or without the backing of the Obama Treasury Department, and what he found is that instead of lending out the money that they were provided with by taxpayers, the banks have been “acquiring other institutions, sitting on it, paying down credit lines,” and, of course, paying out obscene bonuses to executives.
The one thing the banks are not doing is lending.
By Liz Swaine, AVweb
Information provided to the commission investigating the U.S. government’s response to terrorist threats prior to September 11, 2001, names an FAA quality manager in the destruction of an audiotape made in the aftermath of the 9/11 hijackings. Each of at least six air traffic controllers and some ten other employees who were on the job at the New York Air Route Traffic Control Center (ARTCC) in Ronkonkoma, N.Y., during the World Trade Center attacks gathered several hours after to recall their version of events. But that tape, which could have helped determine how the agency responded to clues that four planes had been hijacked, was destroyed before it was ever heard. In fact, officials at the ARTCC were never even told of the tape’s existence. According to the report given to the 9/11 Commission by Department of Transportation Inspector General Kenneth Mead, the audiotape was crushed in the hand of the unnamed FAA employee, then cut into small pieces and tossed into different trash cans around the ARTCC building. Despite the fact that the quality assurance officer had been told to retain all records pertaining to 9/11, he told inspector general investigators he destroyed the tape because he felt making it was contrary to FAA policy, which calls for written statements.
Rolling Stone’s Matt Taibbi’s new investigation suggests massive manipulation by Lehman Brothers and Bear Stearns.
More hospitals, clinics move to make H1N1 shot mandatory
By Steve Watson, Infowars
Employees at a hospital in Ohio have been told that their bonuses will be cut and their salaries frozen should they refuse to be vaccinated with both the seasonal flu shot and the H1N1 flu shot.
The Nationwide Children’s Hospital in Columbus, Ohio, has instigated a mandate on all workers to receive the shots by the end of October.
The threat of pay cuts was delivered in a hospital memo stating that employees with medical or religious objections could opt out, but that those who refuse the treatments will lose out on pay raises or bonuses.
A senior Doctor at the hospital, Dennis Cunningham dismissed claims that the program was extreme, and also attempted to counter concerns that the vaccines contain mercury in the form of the thimerosal preservative.
“Multi-dose vials … there will be a trace in there. It acts as a preservative. No bacteria in there, and it’s kept sterile. But the level is so low, it wouldn’t cause disease in humans,” Cunningham claimed.
However, the Institute of Medicine recommended against the policy of thimerosal containing vaccines in 2001.
Studies have shown a direct relationship between mercury in children’s vaccines and autism. Further studies have shown a decline in neurodevelopmental disorders after the removal of thimerosal-containing vaccines. The preservative has been banned or limited in Europe, Japan, England and Russia. Furthermore, there are no reported instances of autism amongst religious groups such as the Amish community and very few instances are reported in the third world.
Autism was a practically unknown affliction some decades back, but now one in every 150 children is affected.
As the US strategic petroleum reserve (SPR) approaches capacity (721.5 million barrels filled out of a total possible 727 million, and will be filled by January 2010), the federal government will fade out of the oil-buying business. Some bearish traders believe that this factor can weigh in on prices, since most petroleum stocks in the United States are government-held rather than private. Bullish traders have also used the filling of the Chinese SPR as a reason that oil should go much higher.
The team at Casey’s Energy Opportunities believe that planned government buying or selling of crude oil for SPRs actually have very little impact in the overall market. However, an overall drawdown of worldwide inventory could put downward pressure on the price of oil. The various countries also have their particular reasons and influences in decisions to tap their reserves.
So which countries are executing preparedness plans to fill their strategic reserves with $70 oil now (as opposed to $140+)? Below are the 10 countries that consume the most oil in the world, as of 2008, the latest figures available from the BP Statistical Review of World Energy:
Russia, Canada, and Saudi Arabia can leave the list, as they are net exporters of oil and thus do not actually require a strategic reserve, at least in the short term. We’ll also bump Brazil, because its balance of imports is dwindling every year, and it should become a exporter before it requires a reserve. That leaves six countries to examine:
The United States
Not surprisingly, America has the largest strategic reserve in the world in an absolute sense. Its 727 million barrels are stored in four hollowed-out salt domes (and one pending) along the coastline of the Gulf of Mexico. These add up to some 62 days’ worth of imports, according to government sources. The United States government currently has plans to push this to 1 billion barrels, or about 85 days’ worth of imports, which would make the reserves equivalent to those of Japan and Korea.
The SPR build-up will be accomplished by expanding two of the current facilities, for an additional 113 million barrels, and (probably) building a new one in Richton, Missouri, for 160 million barrels. The Richton project has met local opposition, because it would require pumping 50 million gallons of freshwater per day from the Pascagoula River to dissolve enough salt to open up another subterranean cavern. The total cost of the program is estimated at US$3.7 billion, not including the cost to fill the reserves. Oil purchases are likely to be slow, at around 100,000 bpd (barrels per day) before 2014 and 150,000 bpd thereafter.
In a real emergency, the combined American strategic and commercial reserves (the latter held by private corporations, especially refiners) may seem unnervingly thin from the perspective of energy security. Add to that the fact that the government can release them at a rate of only 4.4 million barrels per day, or about half its imports.
Still, the 108 or so days’ reserve it has between government and commercial sources are considered adequate by international standards. The United States has used this reserve twice in the past 20 years (Desert Storm and Hurricane Katrina) to combat severe demand or supply disruptions. It also has the luxury of importing more oil from Canada in an emergency.
Scenarios that could force a sustained drawdown of reserves:
- Sustained hyperinflation in the United States due to actions by the Federal Reserve that causes oil-producing countries to look for better markets to sell oil.
- A prolonged general embargo by OPEC on the United States, forcing America to look to traditional partners such as Canada and Mexico, though they might not have sufficient oil.
- Another war, potentially in North Korea or Iran, requiring a large amount of oil input from America that it simply does not have.
- A particularly active hurricane season that knocks out a large amount of production capacity in the Gulf of Mexico, and the United States releases from the SPR to help.
China’s strategic reserves began being built in 2004, when leaders in China began to realize that the country had no adequate government- controlled reserves to combat any disruptions in the supply of oil. China is a large importer and is dependent on the same sources of foreign oil as the United States. China is even more anxious to build such a reserve, as two of its neighbors, Korea and Japan, both have large strategic reserves.
China currently has four government reserves with a total reserve potential of 272 million barrels, which translates to about 30 days’ consumption. Two of the four have been confirmed full, and there are rumors that all four are and that China has taken advantage of the recent precipitous drop in the price of oil to buy up. According to Chinese government sources, however, the reserves are likely not to be completely full until 2010, and 2009 buying of oil will be at around 42 million barrels.
The government has also announced plans to increase the country’s reserve from 30 to 100 days of consumption. The next stage of the development will call for an additional 170 million barrels in eight storage facilities. The locations of the facilities are as yet secret.
In an emergency, China would likely turn to Russia to buy oil, though only the naive would be surprised if Russia added a premium for the privilege.
Scenarios that could force a sustained drawdown of reserves in China:
- Worldwide embargo on China due to a Chinese invasion of Taiwan.
- High oil prices force Chinese industries out of business, pressuring the government to keep oil prices low domestically by selling some of the reserves to domestic companies.
- North Korea asks for oil from China to support military action on the Korean Peninsula, and China ships it to them on the black market.
- Russia slows or stops its exports as part of the Russian “dominance via energy” strategy, leaving Chinese pipelines trickling and Chinese industries disrupted.
We have placed Japan and South Korea’s reserves together, as the two countries have a treaty that allows them to share their strategic reserves.
Resource-poor Japan has one of the world’s largest strategic oil reserves, enough for 82 days of imports. State-controlled reserves are run by the state-owned Japan Oil, Gas, and Metals National Corporation. The reserves consist of 320 million barrels in 10 different locations, which makes them second only to the United States in absolute volume. Japan’s island geography means that having an emergency supply of crude oil is crucial, and the Japanese government obviously has not ignored this aspect.
South Korea is in one of the global “hotspots” in the world, right beside North Korea. As the country is under an almost constant threat of war, the government has stocked up some 76 million barrels, with capacity for an additional 40 million barrels.
Scenarios that could force a drawdown of reserves:
- Just one at this time, from two possible sources: political instability in the region caused by either the Taiwan or the Korea conundrums disrupts tanker transport, perhaps even forces them to port.
India has a small reserve it began to build in 2004. This stockpile is sufficient for perhaps only two weeks of consumption. The country eventually wants to raise this level to 45 days, though the first phase has not even been completed yet. The projects are estimated to come online in 2012, which means it has taken eight years from planning to completion. These figures imply that India will not even have a somewhat sufficient strategic reserve until 2016, given that the expansion project was approved in 2008.
Germany has the largest reserve in Europe and is among the top in the world as well. Its government has satisfied a federal law that regulates storage be at least 90 days’ worth of net imports. More than half of the storage is in Southern Germany, where large salt caverns exist. Germany is well prepared in its strategic oil reserves, and there are no glaring factors that would force a drawdown of reserves, barring a global catastrophe. Furthermore, the reserves of Germany, France, and Italy are pooled and can be used by any of the three countries in an emergency.
So How Much Do the Reserves Matter?
According to the US Energy Information Administration (EIA) estimates, some 2 billion barrels are held in government-owned strategic reserves around the world. Though this seems like plenty of oil, does it really impact the spot price of oil? Collectively, the answer is yes, as this volume corresponds to 23 days’ worth of global consumption. If drawn down together over a short period of time, the effect on spot price could be substantial.
For illustration’s sake, suppose that countries collectively draw down their entire reserves over the period of a year. This rate would make up for 10% of the daily worldwide trade of crude oil, which could certainly impact price (imagine ConocoPhillips and ExxonMobil both going under at the same time).
Individually, however, even China and the United States have a limited impact on the spot price of oil over a single year. If the United States’ inventory were drawn over an entire year, it would only make for a 4% increase in supply. Under normal buying patterns of each country’s strategic reserves, the impact is even smaller. Since China’s 42-million-barrel purchase is over one year, their purchase would not even make a dent in the daily trade of oil.
Thus, a concerted effort by the worldwide reserves can definitely keep prices down in the short term (within a year, two at best), but cannot make for a paradigm shift in the supply/demand model of oil or the Peak Oil argument. And from the buying side, if governments plan the filling of their strategic reserves, the impact on the spot price of oil is likely to be minimal.
Perception is a tricky horse to ride, however, as we all know. Given a worldwide panic for oil à la the 1973 oil embargo, oil prices could spike in the short term, because government reserves would likely raise purchases 10% or so in a real emergency. This effect would be short lived for the foreseeable future, though, as worldwide reserves are already reaching their limits.
In short, if everything goes according to “plan” by the governments, even filling a large reserve such as the Chinese SPR would have little impact on the price of oil. For SPRs to truly impact the spot price of oil, it would have to be a global situation, with war and embargo the two most likely scenarios. Even then, the impact would be mellowed by limitations on how quickly governments can either release or purchase the oil.
for The Daily Reckoning Australia
- How to Buy Crude Oil for US$2 a Barrel
- The War for Oil Reserves
- OPEC Agrees Not to Cut Oil Production Until it Meets in May
- Oil Prices Has The Mogambo Guru Sticking His Thumb in His Eye
- Pemex and Mexican Peak Oil Equal Expensive Oil
Houses bounce too…
Not much happened yesterday. The Dow fell 47 points. The newspapers attributed the reversal to surprisingly low consumer confidence numbers. Apparently, consumers aren’t so sure this crisis is over. As we reported yesterday, they’re saving money…maybe even at an 8% rate.
Oil didn’t move yesterday. Neither did gold.
The Wall Street Journal reported that markets were reacting to “mixed data.”
That is to say, some reports were encouraging. Others were not. It was as if one weather forecaster called for a blizzard and the other for sunny skies and warm temperatures. Investors didn’t know how to dress.
Among the dark clouds was an item on the falloff in tax revenues. States are having a hard time balancing their books, because their tax receipts are declining. The WSJ reports that they are running 17% below last year. Since states cannot print money, they’re forced to make cutbacks – typically reducing hours worked per employee as well as the total number of employees. This is a bad thing, says the report, because it increases unemployment and lowers the wage base, leading to less consumer spending.
Another little cloud appeared yesterday (in addition to the consumer confidence numbers): the vacation timeshare market is collapsing at a record pace.
Well, don’t worry about it. We met a guy who explained the timeshare business to us.
“What you’re selling is a dream. You bring them to the property. You make sure they have a good time. And then you do to the numbers with them. You show them how much they save by coming to your property rather than on a typical vacation. And then you show them the other properties that they can exchange for. They think they can buy a cheap property and then exchange with an expensive timeshare. But it doesn’t work that way. They get stuck in the cheap unit and the dream gets a little faded. And then, they stop coming…and then they try to sell the timeshare. Timeshares are rarely a good investment.”
Besides, timeshares are a small, quirky part of the housing picture anyway. The real story is in the regular housing market. There, if you believe the forecasters, it’s sunny skies.
House prices seem to be stabilizing. In some areas, they are going up. Of course, in some places you can get a house at half the price it sold for two years ago. That lures buyers back into the market. If we wanted a house to live in, we might be tempted too. That’s why we like falling prices in housing; we get more for our money. But most people want a rising housing market. They think it makes them richer.
They’re likely to be disappointed. They show up at the beach with their umbrellas and sun tan lotion…just as a winter storm hits the coast.
Forbes lists eight reasons to “remain worried about housing”:
- The federal tax credit, worth $8,000, is set to expire at the end of November. That will make housing $8,000 more expensive for first-time buyers.
- The Fed is also ending its $1.45 trillion shopping spree. It has been supporting housing by buying mortgage-backed derivatives. What will happen when it stops?
- Mortgage lending standards are tightening up generally.
- Houses are still not cheap. Forbes cites Shiller’s numbers, putting the average house 41% higher than it was in 2000. Incomes did not increase during that period; ergo, houses are still too expensive.
- Damaged psychology. It will take time for potential homeowners to get over the shock of a bear market.
- The end of summer has arrived. Housing sales always go up in the summer. People relocate in summer, when school is out. Then, sales fall with the autumn leaves.
- There are still huge numbers of houses that will be foreclosed. Forbes says only 12% of option ARMs have been reset. More foreclosures will increase the supply of desperate sellers and decrease prices.
- There’s a ‘shadow inventory’ hanging over the housing market; it could be vast. Everyone knew it would be hard to sell a house in 2009. Many potential sellers held back, waiting for the market to stabilize. As they put their houses up for sale, that too will hold prices down.
Some wiseacre economist has probably already come up with eight reasons why housing prices will go up. But the key thing to recall is that this is a depression…a major restructuring of the economy, not a standard post-war recession. After 64 years, the consumer has finally rung a bell. He has reached his limit. He cannot borrow more. He cannot spend more. He is finally cutting back. That fact will echo through the entire world economy…and through the US housing market…for many years.
Houses, like stocks and corpses, may bounce. But they will not begin a real bull market again for a long, long time.
for The Daily Reckoning Australia
- Property Spruikers Claim Australia Suffers from a ‘Chronic Housing Shortage’
- Housing Market is Becoming More Affordable but That’s Not Necessarily a Good Thing
- When Will Housing Stop Falling in Price?
- Underlying Demand During a Housing Shortage
- The Kitchen is the Place to Be
Our old friend Marc Faber is “highly confident” that things will turn out badly.
“The future will be a total disaster, with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults and the impoverishment of large segments of Western society,” he writes.
“We have a money-printer at the Fed,” he continues, “which guarantees runaway inflation, wholesale debasement of the dollar, and a major lowering of living standards for most Americans and many Europeans as well.
“Meanwhile, Paul Volcker says that China’s rise merely ‘highlights the relative decline of the US.'”
So there you have it: China on the way up, America on the way down.
That’s the drama that we’re watching every day, here at The Daily Reckoning. In our view, the peak of US wealth and power probably came during the period between the fall of the Berlin Wall and the fall of Lehman Bros. But there are probably a lot more shoes to drop before people are fully aware of what is going on.
The way we see it, almost the entire 20th century was a mistake…a dead end.
Europeans were clearly on top of the world when the century began. Then, after WWI the Europeans in America took the lead role. But WWI shook their faith in their evolving political order. Not long after, the German hyperinflation and the Great Depression shook their faith in their economic and financial order. This left a huge vacuum, which was soon filled by ruthless adventurers and ideological schemers. Much of the rest of the century…from ’39 to ’89…was spent in hot wars and cold wars against these Bolsheviks, Fascists, Stalinists and Maoists.
In the end, the more reasonable and consensual societies of the West won the battle. But they, too, were transformed by 50 years of war and nearly a century of bad ideas.
“Whoever fights monsters should see to it that in the process he does not become a monster. When you look into the abyss, the abyss also looks into you,” Nietzsche warned.
Looking into the abyss created by Mussolini, Hitler, Tojo, Pol Pot, and the rest, Western societies decided both to fight them…and to join them. Tax rates soared. Regulations multiplied. University professors taught socialism, Freudianism, modernism, cubism, feminism, racism…and every other ‘ism’ they could think of. Parents spent good money to spend their children to universities that turned them into mush-heads.
And – perhaps most ominous – in the United States of America, the military grew into a greedy, grasping goliath…the very thing Eisenhower had warned against.
Then, there were counter-trends in the ’80s…led by Margaret Thatcher in England and Ronald Reagan in the United States. But these were mostly frauds. Top marginal tax rates were rolled back. And there were some cuts in regulatory procedures. But government spending tended to go up anyway. Worse, Ronald Reagan mistook the Soviet Union for a genuine threat and increased military spending even further to combat it.
And now, the United States staggers under the weight of its eternal wars…its imperial illusions…and its everlasting efforts to provide bread and circuses. If it kept its books like a private enterprise, it would be broke. If it were a public corporation, it would be de-listed.
Still, it spends and spends…and there is no stopping the spending. Trillions are spent on wars in Iraq and Afghanistan, for no apparent reason. But who complains? Too much money is at stake. There are too many lobbyists for too many industries and too many special interests involved. Military spending – even in a time when America faces no substantial challengers – cannot be rolled back. Neither can social spending.
Marc Faber is right. There too, there are too many people with too many dogs in this fight. Both military and social spending will continue to expand until the empire is ruined.
for The Daily Reckoning Australia
- The Anniversary of the “Esperanto Money”
- How Will the United States Finance the Biggest Deficit of All Time?
- The Codependent Relationship Between China and the United States
- America’s Service Industry is responsible for Low Wages
- US Dollar Declining as China’s Currency Rises
To my teammates:
As some of you may know, I always end my summer in the mountains, giving me time to reflect on the bank’s challenges and our strategies to meet them. I have always returned to the company in the fall energized and ready to get to work with all of you to meet those challenges and pursue our goals.
This year, though, has been different. This year, I returned with a strong belief that the major strategic challenges of my tenure as CEO have been met. We have built leading market positions in every major product category in our industry. We have come through the worst economic downturn in 80 years with all the tools, assets and talent we need to succeed and win. We have taken the most important steps to reduce and remove the need for government support of our company.
The next great set of challenges for our company – executing across our businesses to achieve our potential, and imagining how our company must continue to evolve to meet the changing demands of the global marketplace – are for our next chief executive officer, and for our Executive Management Team, which I know is capable of rising to any challenge. I now have a strong sense that the work that has consumed me for the past eight years is largely finished, and that it is time for a new leader to take on new challenges with all of you.
For these reasons, I informed the board today of my intention to retire at the end of the year.I am comfortable with this decision, not only personally, but also as someone who is greatly invested in Bank of America. Our board of directors and our senior management include more talent, and more diversity of talent, than at any time in this company’s history. They begin the next chapter in our company’s history with a franchise unique in the world: a bank with primacy in U.S. retail and commercial banking, global wealth management and corporate and investment banking.
I have spent a lot of time this year meeting with our customers, investors and associates around the country and around the world. They understand what we have built and what we can offer them, and their excitement about the future of this bank is contagious.
I am gratified that even some of the critics of our acquisition of Merrill Lynch have come to acknowledge how well the deal is working out for our clients, and the great potential this combination holds for our shareholders over the long-run. Looking at the range of clients covered by our financial advisors and the strong position our traders and investment bankers have in the most important markets around the world, it has become hard to imagine Bank of America without Merrill Lynch.
Certainly, this journey has been a rocky one, and not for the faint of heart, but perseverance is paying off. There is no question in my mind that our success in these businesses will continue and grow over time.
None of this is to say that our bank does not face challenges. A near double-digit unemployment rate is bad medicine for a bank that serves consumers, and I am disappointed in how we managed credit risk. The next two quarters will be difficult.
I can assure you, though, that we have devoted the resources necessary to managing credit better. We have access to credit markets on terms that reflect our strength and stability. And when the economy does return to something approaching normal, our consumer bank – with preeminent positions in deposits, homes loans and card services – will lead the industry and will be an earnings machine.
Some will suggest that I am leaving under pressure or because of questions regarding the Merrill deal. I will simply say that this was my decision, and mine alone.
Most important to me is this: I will leave knowing that almost anywhere I go in this country, I’ll be able to walk into a Bank of America banking center and receive a warm greeting. I will be able to travel the world, and visit towers full of bright, energetic associates creating financial solutions for companies of every size and shape. Everywhere I go, I will know and see that the company I had the privilege to serve for 40 years is in good hands.
When I joined this company fresh out of college in 1969, I had several offers from other very strong companies, some offering markedly better terms. I chose this company because of the culture and the people I found here. It was a group of people who believed that with trust and teamwork, anything is possible. It was a culture that rewarded hard work and enthusiasm, that allowed and encouraged people to do the right thing, that demanded leadership from its associates, and settled for nothing short of winning.
We remain that company today, because of all of you. Thank you for allowing me to lead the greatest financial services company in the world. Thank you for understanding that our customers come first, and that all our future success flows from them. Thank you for all the support you’ve given me over the years. I’m very grateful. Ken