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Gordon Brown has called for a global financial system Link
Gordon Brown has called on other governments to follow Britain's lead by supporting their struggling banks.
He told the BBC he was trying to "persuade" other world leaders to restructure the global financial system but warned that it "would take time".
Stock markets continue to fall sharply amid concerns about vulnerable banks.
Mr Brown's remarks came as the UK chancellor, Alistair Darling, is in Washington to meet finance ministers from the G7 group of richest nations.
The UK's FTSE 100 index fell 10% on opening, extending Thursday's losses, reflecting deep concerns about the fragility of the banking system and the prospect of a global recession.
The falls come despite Wednesday's historic bail-out package for ailing banks, totalling £500bn.
Mr Brown did not comment on the steep market fall but said he had taken the "right decisions" to stabilise the banking system.
"I am trying to persuade leaders to do exactly the same as we've done so we can get the whole system moving again," he said.
Earlier, in an article for the Times, he said the crisis needed a "global solution" and urged world leaders to meet and plan a restructuring of financial markets.
Because this is a global problem, it requires a global solution
Mr Brown said that the banking system was fundamental to "everything we do".
He said: "Because this is a global problem, it requires a global solution.
"Indeed this now moves to a global stage with a range of international meetings starting this week with the G7 and the International Monetary Fund and, we propose, culminating in a leaders meeting in which we must lay down the principles and the new policies for restructuring our banking and financial system all around the globe."
Mr Brown said that it is "only through the boldest of co-ordinated actions across the globe" that families and businesses could be "adequately supported".
However, other European countries are thought to be sceptical about offering the same level of support to banks as in the UK with France understood not to want to guarantee billions of new bank debt.
On Thursday, Work and Pensions minister Tony McNulty became the first member of the government to publicly say Britain was facing recession.
"We're slowly getting to a stage where the slowdown may well turn technically into recession and then we'll be talking about the nature and depth of the recession," he told BBC2's Daily Politics.
Lib Dem leader Nick Clegg said the bail-out had "probably bought us a recession rather than a depression" but he called for another round of co-ordinated worldwide interest cuts and action by the IMF to help Iceland, which has seen its banks collapse.
A team of Treasury officials is visiting Iceland on Friday in an effort to defuse a diplomatic row between Britain and Iceland over protection for investors and clarify how individual savers and public bodies such as local authorities can retrieve their money.
Mr Darling's Washington meeting comes after the Dow Jones in New York slumped to its lowest level in five years, closing below the 9000 points barrier.
In a further development, the value of City bonuses in the UK is expected to fall this year by 58%, according to the Centre for Economics and Business Research.
But it still forecasts that bonuses of about £3.5bn will be paid out.
Below is an article I posted on the taxes and money page
almost a year ago it is worth a read if you haven't already, and worth a reread if you have
The Coming Financial Collapse of America (and Why Today's Market Bloodbath is Only a Small Taste of Things to Come...) by Mike Adams
Originally published January 22 2008
Americans have always been fond of the idea of getting rich without effort by putting their money in things that produce no profits and then magically being able to ride those investments, milking them for spending cash that supports a drunken spending lifestyle. From 1998 - 2001, that profit vehicle was, of course, dot-com stocks. From 2001 to the present, it's been housing. Never mind the fact that a house produces nothing real, earns nothing real and actually loses utility with each successive year of its existence (roof repairs, anyone?) -- Americans have been convinced over the last seven years that housing prices would rise forever, allowing people to simply extract money from their home equity as if their house were some sort of giant ATM machine.
As the markets are finally demonstrating today, the "economic good times" spurred by a runaway housing price boom (and powered by astonishingly fraudulent lending practices by dishonest banks) are over. A day of reckoning has arrived, and the unwinding of this false wealth that has been propping up the U.S. economy for so many years is about to be unleashed upon the American people. (Today's stock market meltdown is only the beginning...)
There's no question whatsoever that this housing market will experience a correction. ...It's eventually going to come tumbling down. The only question is whether it's going to be a correction or a crash.
Friends, I believe it is time to take your money and exit the speculative real estate market. The average person doesn't understand anything about finances and never will. The average person can't even calculate a 15 percent tip at a restaurant, and he or she is buying real estate because he or she wants to double his or her money. Are you kidding me? Take your money and run; that's my advice. Run from the inflated real estate marketplace before you become another victim. These super hot, speculative housing bubbles and stock market bubbles cannot continue. They always correct. Gravity kicks in, and, eventually, things unwind. A lot of people get hurt. They lose their money. To some of those people, I say, "That's a really expensive education you just paid for." A lot of life's lessons are hard to learn, but some of them can be rather expensive.
So, it's December 2005. I'm going on the record as saying this bubble is going to pop, folks, and you can call me a pessimist or a doomsayer if you want. The fact is, if you understand math, you know I'm right. If you want to protect your own finances, you'd better take a good, hard look at this and make some decisions about what you're going to do. Do not leave yourself over-leveraged in speculative real estate. You thought you were going to retire on the beach, and it ends up you're flipping burgers as a second job to pay off what you owe the bank, and they garnish your wages on top of that. That's what happens to people who don't get out in time.
Two Years Later, the Housing Crash is On
I point out these predictions not to prove I was right, but rather to demonstrate how easy it was to see these things coming. The inevitable bursting of the housing bubble was a no brainer to any rationally-minded person, and yet everywhere I turned back in 2005, I kept hearing (from apparently intelligent folks) things like, "Housing prices have never fallen," or, "Buying a house is the best investment you can make!"
Nonsense. Any fool could see that while housing prices were rising 15 - 25% a year in some regions, there were no underlying fundamentals that would justify such an increase in the value of the property. The population, for example, wasn't increasing by 25% per year. Houses weren't becoming 25% more useful. Land wasn't becoming 25% more scarce. So what could possibly explain the rapid rise in housing prices? Easy money, of course.
That easy lending practices were being so aggressively pushed could only mean that more money was being artificially injected into the housing market, causing a fictitious rise in the value of homes based on the fact that there was too much money floating around in the hands of people who probably wouldn't qualify for such loans under normal, rigorous lending conditions. And once you realize that, it's not difficult to figure out that such lending practices will sooner or later backfire with a massive round of bankruptcies and bank repossessions.
And that, of course, will inevitably lead to a sustained drop in housing prices that, as I predicted, could ultimate see many homes drop to 50% of their peak values.
That's what's coming. I don't even have to offer a prediction of it: It's just a natural reaction to the economic practices that have been so unwisely pursued in this country for years.
The Domino Effect on the U.S. Economy
The U.S. economy, as any astute financial observer has noted for years, is running on artificial wealth that has been manufactured by the Federal Reserve and swallowed by gullible consumers chasing that pot of gold at the end of the easy money rainbow. An alarmingly large percentage of U.S. economic activity is driven by consumer spending and the taxation of such activities. So when housing prices plummet and consumer bankruptcies start piling up, here's what we're going to see next:
My prediction for 2008 - 2012 is a massive wave of municipal bankruptcies, state bankruptcies and escalating national debt. We are going to see cities and states go belly up, pension programs terminated (or watered down), and financial institutions teetering on the brink of disaster.
And the worst part of it all? The only way out of this financial mess is for the Federal Reserve to steal yet more money from the American people by printing more money and hyperinflating the currency.
This is the part where the late Aaron Russo and his film Freedom to Fascism comes into play. If you haven't already watched this documentary on the massive fraud of the Federal Reserve and the IRS, watch it now at Google Video: http://video.google.com/videoplay?docid...
This is also the part where Ron Paul comes in (www.RonPaul2008.com), since Ron Paul is the only Presidential candidate who understands the financial destruction being caused by the Federal Reserve and has pledged to end the Fed's control over the U.S. money supply. (The Fed, by the way, is a privately-owned corporation that isn't even controlled by U.S. lawmakers.)
But given that most Americans are still likely to vote for status quo candidates and not for the radical changes required to bring economic sanity to our nation, it seems inevitable that this nation won't learn its lessons about the laws of economics until the currency is near-worthless, the population is destitute, the banks are owned by wealthy foreigners and the neighborhoods are boarded up and abandoned due to a massive wave of foreclosures.
While all that's happening, of course, the Federal Reserve is going to be trying (in vain) to print its way out of the debt implosion by creating hundreds of billions of dollars out of thin air -- an act that quietly steals money from the people due to the loss of purchasing power (inflation). The amount of money needed to bail the U.S. out of its impending financial crisis will be so large that the real value of saved money in U.S. currency (i.e. dollars) could be reduced anywhere from 30% to 80%. Imagine: One day you have $25,000 in the bank that buys a car, and the next year, that same $25,000 only buys half a car. Nobody stole dollars from your account, but the Federal Reserve stole your purchasing power by inflating the currency while trying to print its way out of a national debt crisis! This is what's coming next.
The mathematically-impaired American masses, largely unable to follow basic economics, are destined to watch all this unfold with bewilderment, not knowing why their dollars are becoming worthless, but being rightly outraged by the turn of events at the same time. The MSM (Mainstream Media) will be no help, of course, since it's in on the scam. It will likely find some foreign scapegoat like blaming China's currency or Middle East oil prices for the disastrous effects of stupid domestic economic policies that have been pursued by Democrats and Republicans alike. (Of course, nobody has put the U.S. more deeply into debt than George W., largely thanks to spending on war.)
There's little question that hard economic times are coming, and not one in a hundred people has any real clue what to do about it. Not even many mainstream investment professionals, by the way -- they're the same idiots who probably told you to buy into the housing bubble in the first place, am I right? (Remember, through 2006 and 2007 when I was urging everybody to get OUT of the housing market, many investment "professionals" were urging people to keep on buying and leveraging their money in yet more housing! We'll all get rich! [Insert Howard Dean scream here...] Yaaaargh!)
So what can YOU -- the intelligent reader -- do with all this information? You're the exception to the idiocy of the masses, as is evident by the very fact that you get at least part of your news and information from non-mainstream sources. So how can you protect yourself from these hard economic times?
Here are some sensible solutions:
Solutions for Surviving the Economic Downfall of America
Leeb is right on the money when it comes to understanding economics trends (and telling the truth about what's coming). He was one of the first to predict oil would reach $100 a barrel (which it did just a few weeks ago), despite the raucous laughter from the investment community following his prediction. (He predicted that price when oil was hovering around $25 a barrel, by the way...)
His book gives outstanding investment recommendations for those who have savings or retirement funds they wish to protect from the coming economic fallout. Rather than repeating that investment advice right here, I would prefer that you get his book, read it and the follow his recommendations that best suit your risk vs. reward goals.
Secondly, let me say that the great drunken spending orgy is nearly over for everybody involved: Households, cities, states and even the U.S. federal government. Although there may be a few remaining grunts and gasps of debt spending that manage to squeeze through the cracks, the bottom line is that this debt bubble party is essentially over. This means we're going to see a contraction in spending at all levels, and a significant lull in the national economy.
You see, until now, we've actually been partying on China's money. It's true! China has been lending the U.S. hundreds of billions of dollars, and the U.S. has been using that money to finance wars and lousy health care spending policies that keep the American people perpetually diseased. This nation has actually been partying like a rich banker's daughter on her 21st birthday who borrowed daddy's credit card and hit the town for a night of (finally) legalized drinking. It's largely been someone else's money that has financed our drunken-sailor spending spree, and that line of credit will soon be significantly slowed (or made a whole lot more expensive to finance).
Why? Because the United States will, I predict, lose its AAA credit rating in international debt markets. With the U.S. in debt far more than ever before -- and hemorrhaging wealth by the second through spending on war and disease (health care) -- it won't be long before the serious lenders of the world (China, Japan, Abu Dhabi, etc.) figure out that loaning money to the U.S. Treasury Department at low rates of return is an idiot's gamble. They'll hike up the rates for future loans to the U.S., and that will cause the U.S. federal government's debt spending addiction to suddenly become a more expensive habit than a D.C. Mayor's crack addiction.
Overnight, the U.S. could become a sub-prime borrower. Its banks have already landed in that category, thanks to the huge cash injections from wealthy foreigners we've seen taken on by U.S. banks in the last few weeks!
And all this, of course, means yet more contraction of the U.S. economy.
Getting back to how you can protect yourself in these hard economic times, this is a time to control your own spending. Here's what I've consistently recommended to intelligent people over the years:
1) Own your car. Don't borrow money to drive a car. It's better to own a beater than to make payments on something you can't really afford.
2) Own your home. Instead of moving to a larger home when you qualify for loans, work to pay off your existing home mortgage and own your home outright. At the very least, pay down your loan so you have 50% equity in your home, which should insulate you from all but the very worst housing bubble price drops.
3) Stop spending money on stupid overpriced things like Starbucks coffee, soda, brand-name laundry detergent, diamond jewelry and processed foods. Stretch your money by buying low-cost, bulk food ingredients like lentils, brown rice and quinoa.
4) Protect your health! Mark my words: There will be no such thing as a national health care system that's any good; not under ANY future president. Why? Because our entire health care paradigm is focused on treating disease rather than promoting health. If you're waiting around for a health care system to make you healthy, you're on a fool's errand. Take charge of your health right now and use nutrition, superfoods, sunlight, exercise and avoidance of all toxic chemicals to boost your health (and thereby insulate yourself from future health care minefields).
5) Own some productive land. Can you actually grow at least 10% of your own food? How about 25%? Owning productive land that actually generates fruits, nuts or edible herbs and plants is a form of permanent wealth. Regardless of what happens to the world economy, land that can produce food and medicine will always hold value (to yourself and others). Climate matters. An acre of land in wind-swept South Dakota isn't worth much. That same acre in Southern California or Hawaii is a whole lot more useful in terms of producing things that people value.
6) Own a good bicycle (and know how to repair it). There's no form of transportation that's more affordable. Too out of shape to pedal? No worries: Get yourself an Electric Bike from Electric Bikes Northwest (they ship all over the country). Electric bikes cost almost nothing to operate (far less than a penny per mile) and still give you a bit of exercise.
7) Don't save all your money in one bank! And certainly don't save it all in U.S. currency. Diversify. Banks may fail. The currency may even fail. Be prepared to wake up one day and see your green U.S. dollars declared worthless.
Disclaimer: I'm not offering you financial advice. Do your own research on this and make informed financial decisions using the help of financial professionals. My information here is offered as-is, with honest intent but no promise of accuracy. You'll have to decide for yourself what's really ahead in terms of a bankrupt nation and a depressed economy.
It's not all bad news, by the way...
The Good News
The good news in all this is that the U.S. government simply won't be able to afford its campaign of imperialism and war mongering against the nations of the world. Troops will eventually have to come home for one good reason: The government will no longer be able to afford to pay them! (What? No Pay? Watch all those soldiers turn around and head directly home when the money stops. The proper term for such employees is "mercenaries," by the way...)
Much the same will happen to Big Pharma and the massive medical scam right now masquerading as health care in the United States. When the U.S. government can no longer acquire easy debt money, the monopoly-priced spending on pharmaceuticals through Medicare and Medicaid will have to be halted or significantly reformed. Somewhere along the line, somebody might get the idea that we could halt health care spending by 90% in a single decade by simply investing in disease prevention and health education rather than pushing pills and disease. So the good news is that a bankrupt nation will eventually be forced to just say no to Big Pharma's monopoly-priced drugs.
So far, not bad, huh? Ending stupid wars and dangerous health care practices is definitely a step in the right direction, and it's all coming our way soon thanks to the inevitably bankruptcy of the U.S. government and the downfall of the U.S. economy. There's nothing like a sobering economic wake-up call to force nations to either reform their ways or face extinction.
From there, lots of possibilities exist. The centralized U.S. government might become so weak that regions of the country would declare their independence and begin self-rule. (Happens all the time: See the history of the Balkans, the former Soviet Union, post-Spanish rule in South America, etc.). Each region might then invent its own currency to replace the disastrous dollar. Tip: Only those currencies backed by gold reserves will ever work in the long term. Paper money simply doesn't hold value (as we're all seeing quite clearly right now...)
U.S. Spending Top Three List: War, Disease and Debt
I see 2008 - 2012 as being very tumultuous years for the United States of America. This nation is technically bankrupt right now. And do you know where the spending is going? Check this out: The top three things that the U.S. government spends money on are: (figures from 2006)
1) WAR: Department of Defense + Veterans' benefits ($580.5 billion) 2) DISEASE: Medicare + Medicaid ($614.1 billion) 3) DEBT: Debt to the people (Social Security + Welfare) and to debt holders (interest on national debt) ($1,115.4 billion)
What's fascinating about all this is that these three things take up 85% of the federal budget! (Total 2006 federal budget was $2.7 trillion.)
Yes: 85% of the federal budget goes to pay for war, disease and debt. Need I say more? That fact right there should tell you all you need to know about the future of this nation: The U.S. is about to become history. In the history of the world, no nation that spends 85% of its budget on war, disease and debt has ever survived for more than a few years. (Rome spent far less on war and still couldn't keep its republic together...)
For all those readers who agree with me on my anti-war stance, don't worry: We'll all get our wish soon! The U.S. is so bankrupt that waging war will soon no longer be an option. President Bush has done what the terrorists could have only dreamed of doing: destroying the future of an entire nation and watching it implode under the weight of its own debt. (If you thought the collapse if the Twin Towers was something, just wait until you see the fall of Wall Street...)
Sobering Economic News Wins You No Friends in a Delusional Nation
I tend to be a little early in taking precautions against financial disasters. I warned the public about the dot-com crash several years before 2001, and my warning about the housing crash was, as you can see, two years early as well. I've learned several things about making public predictions based on economic reality:
1. Nobody wants to believe your prediction when the bubble is hot and people are operating under the illusion that "We're all getting rich!" In offering sobering predictions of economic fallout stemming from the blatantly obvious financial disasters being pursued in this country, I've been called a doomsayer, a pessimist and someone who fails to understand the "new economics" (a fictitious branch of economics that's used to hype every new market boom to a gullible public).
2. The public isn't interested in financial reality. The public wants to believe whatever fictions support their current investments. If they're invested in houses, they will dismiss any news (no matter how factual) that goes against the decision they've made to hold those investments. It's a common type of investing myopia: Once an investor places his (or her) faith in a stock, an option or a house, they will selectively filter out all information that runs counter to their currently-held position. (It's sort of like the way doctors see the world of conventional medicine vs. natural medicine...)
3. Few Americans can even imagine the collapse of America. (Most Romans couldn't imagine the fall of Rome, either.) They think America is so strong and dominant on the world stage that it can weather any storm. Do you know why these people hold such myopic views? Because they watch the U.S. media, of course! There is no nation with a mainstream media capable of reporting the truth about that nation's own political or economic policies. In truth, America is just one experiment in a history of failed debtor nations spanning millennia. The number of empires in world history that have risen and fallen due to uncontrolled spending or war mongering is truly staggering (something like 100+). Like any other nation, the U.S. is not immune to the effects of stupid management (although it has achieved numerous historical milestones such as being the nation with the largest national debt in the history of the world...)
4. Being ahead of the masses in your observations of economic trends is no way to win a popularity contest. If you're 30 days ahead of the masses, you're considered a genius; but if you're two years ahead, you're considered insane. It makes me wonder about the experiences of historical geniuses like Nikola Tesla, since they were at least a hundred years ahead in their understanding of science.
5. The mainstream never agrees with you until it's all over, and then they blame you for causing it by "scaring everybody." Hilarious.
Final predictions: This financial situation won't head straight down. The Plunge Protection Team in Washington (and at the Fed) will do their best to keep propping up this economy like a Weekend At Bernie's. So you'll see short-term recoveries and stock prices jumping up and down probably all year. The markets may even reach new highs as the Fed hyperinflates the currency by injecting easy money into the system. As usual, it's all a scam. The unavoidable trend is the ultimate downfall of the debt-ridden U.S. economy and a massive recalibration of this nation's economic behavior, which may or may not include the dissolution of the nation itself. American may somehow survive this unprecedented debt crisis. Then again, it may not.
One Politician told us the truth and gave us the answers to the nations problems was demonized and ridiculed!.
You know I have come to a conclusion that the American people want change, they just don't want to change.
Great article below! ~~~~~~~~~~~
Wall Street rescue may be worst legislation ever Ron Smith
October 8, 2008
The American people spoke last week, and their rulers ignored them. That's nothing new, I know, but the passage of the bill to rescue Wall Street and other corporate interests from being grievously injured by what they themselves created in a frenzy of runaway greed is the most egregious, morally repugnant piece of legislation to be signed into law since - well, since when? I can't think of anything more ghastly in not only what it does but also what it implies about the future of this nation of ours.
It provides welfare for the mega-rich from the ordinary taxpayer. The rulers will ride out falling markets on the backs of the masses, who were told time and again during the drama preceding the enactment of this thing that the reason they didn't like it one bit was that they - the little people - didn't understand it and were too stupid to applaud forking over hundreds of billions of dollars to their betters in just the manner being prescribed. This unprecedented raid on the public till had to be done lickety-split. Authority figures agree, so who are we to argue? Why should there be hearings when the experts were in agreement as to what should be done? Why listen to any of the many dozens of economists who thought the measure to be insane? It's become trite to call this swollen, pork-laden bill "socialism for the rich," but it is precisely that.
And these men we have running for president, where are they on this? Initially, both Sen. John McCain and Sen. Barack Obama expressed their tentative approval of the bailout, oops, I mean rescue bill, and then began backtracking when the extent of voter disapproval made itself known. A few days later, they came to agree on the necessity of it, thereby illustrating beyond any lingering doubt that, as Ron Paul puts it, "our one-party system is complicit in yet another crime against the American people."
People being what they are, many folks of a partisan bent like to blame the other party for the mess we find ourselves assigned, against our will, to clean up. Who dug the hole? Be assured that both Republican and Democratic politicians have been shoveling away at it for many years. Democrats say the GOP is at fault for foisting upon us various deregulations that caused the mortgage mess that triggered the credit implosion. But Tom Donlan says in Barron's that the problem is not that there weren't enough regulators or regulations, but that the regulators "were not sane." In an opinion piece, Mr. Donlan says, "Regulation and regulated institutions encouraged the risk-taking, helped to finance it and continue to excuse it."
Republicans accuse the Democrats of pressuring Fannie Mae and Freddie Mac into creating a market for toxic mortgages. Again, Mr. Donlan: "Who did the pressuring? A string of presidents and their appointees at the Department of Housing and Urban Development and a legion of congressmen inspired by housing activists dreaming of home ownership for all." Republicans. Democrats. They're all in it together, an idea those partisans and their media champions find difficult to accept, even though it seems to me undeniable.
I find it strangely satisfying that Congressman Paul, the little Texan who was soundly thrashed in his Quixotic quest for the Republican presidential nomination - the man who was laughed at and mocked as a kook when he tried to alert us all to the fragile and unsustainable nature of our money system - is now seen by more and more Americans as the one politician who told us the truth. No wonder the system spit him out.
The plan bulldozed through Congress last week carries with it dire implications about the future of our country. To redistribute income upward as this does means the game is over. We live in an age looking suspiciously like that of other empires in their late periods of decay, and if you don't know what that portends, it's probably just as well.