Wednesday, December 30, 2009

Are you terrorized, yet?

My government assumes that I am afraid and can be terrorized. Screw them!! I want my freedoms preserved not abused by a government which is infected with people who want to control all aspects of my life. A recent study shows that 71% of our lives and freedoms are now in the grasp of a powerful centralized government. Americans have been manipulated into a fear based existence and have become easily manipulated by religious idiots, government rats and a duplicitous and compliant media.

Listen carefully to what Ron Paul says. Since he is an elected official he has to tip toe around some facts. The powerful interests behind the destruction of America would be more than willing to attack him for honestly warning America of the malefactors controlling America.

Friday, December 18, 2009

Lord Monckton reports on Pachauri’s eye opening Copenhagen presentation

Thursday, Dec 17th, 2009

From The Viscount Monckton of Brenchley in Copenhagen

In the Grand Ceremonial Hall of the University of Copenhagen, a splendid Nordic classical space overlooking the Church of our Lady in the heart of the old city, rows of repellent, blue plastic chairs surrounded the podium from which no less a personage than Dr. Rajendra Pachauri, chairman of the IPCC, was to speak.

I had arrived in good time to take my seat among the dignitaries in the front row. Rapidly, the room filled with enthusiastic Greenies and enviro-zombs waiting to hear the latest from ye Holy Bookes of Ipecac, yea verily.

The official party shambled in and perched on the blue plastic chairs next to me. Pachauri was just a couple of seats away, so I gave him a letter from me and Senator Fielding of Australia, pointing out that the headline graph in the IPCC’s 2007 report, purporting to show that the rate of warming over the past 150 years had itself accelerated, was fraudulent.

Would he use the bogus graph in his lecture? I had seen him do so when he received an honorary doctorate from the University of New South Wales. I watched and waited.

Sure enough, he used the bogus graph. I decided to wait until he had finished, and ask a question then.

Pachauri then produced the now wearisome list of lies, fibs, fabrications and exaggerations that comprise the entire case for alarm about “global warming”. He delivered it in a tired, unenthusiastic voice, knowing that a growing majority of the world’s peoples – particularly in those countries where comment is free – no longer believe a word the IPCC says.

They are right not to believe. Science is not a belief system. But here is what Pachauri invited the audience in Copenhagen to believe.

1. Pachauri asked us to believe that the IPCC’s documents were “peer-reviewed”. Then he revealed the truth by saying that it was the authors of the IPCC’s climate assessments who decided whether the reviewers’ comments were acceptable. That – whatever else it is – is not peer review.

2. Pachauri said that greenhouse gases had increased by 70% between 1970 and 2004. This figure was simply nonsense. I have seen this technique used time and again by climate liars. They insert an outrageous statement early in their presentations, see whether anyone reacts and, if no one reacts, they know they will get away with the rest of the lies. I did my best not to react. I wanted to hear, and write down, the rest of the lies.

3. Next came the bogus graph, which is featured three times, large and in full color, in the IPCC’s 2007 climate assessment report. The graph is bogus not only because it relies on the made-up data from the Climate Research Unit at the University of East Anglia but also because it is overlain by four separate trend-lines, each with a start-date carefully selected to give the entirely false impression that the rate of warming over the past 150 years has itself been accelerating, especially between 1975 and 1998. The truth, however – neatly obscured by an ingenious rescaling of the graph and the superimposition of the four bogus trend lines on it – is that from 1860-1880 and again from 1910-1940 the warming rate was exactly the same as the warming rate from 1975-1998.

click to enlarge
4. Pachauri said that there had been an “acceleration” in sea-level rise from 1993. He did not say, however, that in 1993 the method of measuring sea-level rise had switched from tide-gages to satellite altimetry against a reference geoid. The apparent increase in the rate of sea-level rise is purely an artefact of this change in the method of measurement.

5. Pachauri said that Arctic temperatures would rise twice as fast as global temperatures over the next 100 years. However, he failed to point out that the Arctic was actually 1-2 Celsius degrees warmer than the present in the 1930s and early 1940s. It has become substantially cooler than it was then.

6. Pachauri said the frequency of heavy rainfall had increased. The evidence for this proposition is largely anecdotal. Since there has been no statistically-significant “global warming” for 15 years, there is no reason to suppose that any increased rainfall in recent years is attributable to “global warming”.

7. Pachauri said that the proportion of tropical cyclones that are high-intensity storms has increased in the past three decades. However, he was very careful not to point out that the total number of intense tropical cyclones has actually fallen sharply throughout the period.

8. Pachauri said that the activity of intense Atlantic hurricanes had increased since 1970. This is simply not true, but it appears to be true if – as one very bad scientific paper in 2006 did – one takes the data back only as far as that year. Take the data over the whole century, as one should, and no trend whatsoever is evident. Here, Pachauri is again using the same statistical dodge he used with the UN’s bogus “warming-is-getting-worse” graph: he is choosing a short run of data and picking his start-date with care so as falsely to show a trend that, over a longer period, is not significant.

9. Pachauri said small islands like the Maldives were vulnerable to sea-level rise. Not if they’re made of coral, which is more than capable of outgrowing any sea-level rise. Besides, as Professor Morner has established, sea level in the Maldives is no higher now than it was 1250 years ago, and has not risen for half a century.

10. Pachauri said that if the ice-sheets of Greenland or West Antarctica were to melt there would be “meters of sea-level rise”. Yes, but his own climate panel has said that that could not happen for thousands of years, and only then if global mean surface temperatures stayed at least 2 C (3.5 F) warmer than today’s.

11. Pachauri said that if temperatures rose 2 C (3.5 F) 20-30% of all species would become extinct. This, too, is simply nonsense. For most of the past 600 million years, global temperatures have been 7 C (13.5 F) warmer than today, and yet here we all are. One has only to look at the number of species living in the tropics and the number living at the Poles to work out that warmer weather will if anything increase the number and diversity of species on the planet. There is no scientific basis whatsoever for Pachauri’s assertion about mass extinctions. It is simply made up.

12. Pachauri said that “global warming” would mean “lower quantities of water”. Not so. It would mean larger quantities of water vapor in the atmosphere, hence more rain. This is long-settled science – but, then, Pachauri is a railroad engineer.

13. Pachauri said that by 2100 100 million people would be displaced by rising sea levels. Now, where did we hear that figure before? Ah, yes, from the ludicrous Al Gore and his sidekick Bob Corell. There is no truth in it at all. Pachauri said he was presenting the results of the IPCC’s fourth assessment report. It is quite plain: the maximum possible rate of sea-level rise is put at just 2 ft, with a best estimate of 1 ft 5 in. Sea level is actually rising at around 1 ft/century. That is all.

14. Pachauri said that he had seen for himself the damage done in Bangladesh by sea-level rise. Just one problem with that. There has been no sea-level rise in Bangladesh. At all. In fact, according to Professor Moerner, who visited it recently and was the only scientist on the trip to calibrate his GPS altimeter properly by taking readings at two elevations at least 10 meters apart, sea level in Bangladesh has actually fallen a little, which is why satellite images show 70,000 sq. km more land area there than 30 years ago. Pachauri may well have seen some coastal erosion: but that was caused by the imprudent removal of nine-tenths of the mangroves in the Sunderban archipelago to make way for shrimp-farms.

15. Pachauri said we could not afford to delay reducing carbon emissions even by a year, or disaster would result. So here’s the math. There are 388 ppmv of CO2 in the air today, rising at 2 ppmv/year over the past decade. So an extra year with no action at all would warm the world by just 4.7 ln(390/388) = 0.024 C, or less than a twentieth of a Fahrenheit degree. And only that much on the assumption that the UN’s sixfold exaggeration of CO2’s true warming potential is accurate, which it is not. Either way, we can afford to wait a couple of decades to see whether anything like the rate of warming predicted by the UN’s climate panel actually occurs.

16. Pachauri said that the cost of mitigating carbon emissions would be less than 3% of gross domestic product by 2030. The only economist who thinks that is Lord Stern, whose laughable report on the economics of climate change, produced for the British Government, used a near-zero discount rate so as artificially to depress the true cost of trying to mitigate “global warming”. To reduce “global warming” to nothing, one must close down the entire global economy. Any lesser reduction is a simple fraction of the entire economy. So cutting back, say, 50% of carbon emissions by 2030, which is what various extremist groups here are advocating, would cost around 50% of GDP, not 3%.

17. Pachauri said that solar and wind power provided more jobs per $1 million invested than coal. Maybe they do, but that is a measure of their relative inefficiency. The correct policy would be to raise the standard of living of the poorest by letting them burn as much fossil fuels as they need to lift them from poverty. Anything else is organized cruelty.

18. Pachauri said we could all demonstrate our commitment to Saving The Planet by eating less meat. The Catholic Church has long extolled the virtues of mortification of the flesh: we generally ate fish on Fridays in the UK, until the European Common Fisheries Policy meant there were no more fish. But the notion that going vegan will make any measurable impact on global temperatures is simply fatuous.

It is time for Railroad Engineer Pachauri to get back to his signal-box. About the climate, as they say in New York’s Jewish quarter, he knows from nothing.

Wednesday, December 16, 2009

Our earth has experience climate change before

Climates change all the time. Temperatures vary from hour to hour, day to day, season to season, year to year, eon to eon, millennium to millennium and epoch to epoch. Climate change does not affect every place on the earth the same. Some areas will become more desirable as the climate cools or warms. Just ask a duck or goose that flies from North to South and back again every year. Or better ask a "Snow Bird" Canadian that migrates from north to south and back again every year. It was always the human condition to migrate during ancient times. Why live out the winter on top of a snow cap when the coast is warm and breezy during the winter? Cattlemen move their cattle from high country to low country grazing grounds very winter, it's the obvious thing to do. Al Gore wants to change the weather rather than adapt, adaptation is more "green" than phony climate religion.

Monday, December 14, 2009

The Mini-ice age of 1810

Global warming is our current focus, but from 1810 to 1819, people worried because the planet was far colder than usual, with the planet cooling almost a full degree Fahrenheit. 1816 according to climate historians was known as "the year without a summer."

The chill of 1816 has long been blamed on an Indonesian volcano called Tambora, which erupted the year before. But why the years before Tambora's eruption were also colder than usual was a mystery. Newly uncovered evidence in the ice of Antarctica and Greenland suggests that another volcanic eruption may have contributed to the worldwide dip in temperatures.

Jihong Cole-Dai, a chemistry professor at South Dakota State University, led the expeditions to Antarctica and Greenland, told NPR's Guy Raz in an interview that volcanoes dump large quantities of ash and sulfur dioxide into the atmosphere, which acts "like a giant window shade, reflecting sunlight and lowering temperatures on the ground for years afterward."

But Cole-Dai empasizes that one eruption isn't enough to freeze an entire decade. He knew something else had to have been going on which turned out to be layers of sulfur buried in ice cores from Greenland and Antarctica that showed another volcano had erupted some time in 1809, triggering a mini ice age.

Cole-Dai said his research team isn't sure exactly where the mystery volcano is, but they suspect that it was somewhere near the equator and that it had to be large enough to blanket the planet in ash.

Casey Kazan

Sunday, December 13, 2009

Climate Change; Monckton is so articulate when speaking to people.

Pertinent facts by Lord Monckton;

1: There has been climate change for the last 4 Billion years.

2: Why are you against it now?

3: The United Nations, in it's calculations, shows that over the last 20 years we (humans) could not have had any effect on climate. If so is it a very recent effect that we might have had?

4: If there has been global warming during the last 300 years, have we (humans) suddenly during the last 20 years done something that really changes the climate?

5: In the last 10 years the global temperature has decreased .05 degrees and during the last 15 years there has been no statistically significant increase. In fact we have had cooling for the last 9 years.

6: In the last 30 years there has been virtually no change in the amount of sea ice in the world. The University of Illinois which keeps all the arctic and antarctic ice records, their records show almost no change of in the last 30 years of the sea ice extent.

7: The NOAA records there has no statistically significant increase in land falling Atlantic hurricanes on the coast during the last 150 years.

8: The combined intensity, frequency and duration of all hurricanes, typhoons, and tropical cyclones around the world reached it's lowest point in 30 years just 2 months ago.

Don't believe anything before checking it out. This isn't about belief (religion) it's about science.

According to the World Meteorological Organization, Arctic sea ice has increased by 19 percent since its minimum in 2007

Friday, December 11, 2009

U.S. To Pay $3.4 Billion to Settle Native American Suit

C-JThe size of the award is obviously large, what bothers me most is who stole their money? Will the perps be prosecuted for using Indian Trust funds for their own personal profit? C-J

By Ashby Jones

Associated Press
Elouise Cobell, the lead plaintiff, with Interior Secretary Ken Salazar on Tuesday. Attorney General Eric Holder is at right. Photo: Manuel Balce Ceneta/Associated Press. Federal Indian law — or the law pertaining to the land and other holdings owned by Native Americans — isn’t a typical area of coverage for us. But when a lawsuit between Native American and the U.S. government settles for $3.4 billion, well, we sit up and take serious notice.

The federal government announced on Tuesday that it intends to pay that sum to settle claims that it has mismanaged the revenue in American Indian trust funds. According to the NYT’s account, the settlement could end one of the largest and most complicated class-action lawsuits ever brought against the United States.

According to the NYT story, the Interior Department manages about 56 million acres of Indian trust land scattered across the country. The government handles leases on the land for mining, livestock grazing, timber harvesting and drilling for oil and gas. It then distributes the revenue raised by those leases to the American Indians. In the 2009 fiscal year, it collected about $298 million for more than 384,000 individual Indian accounts.

The lawsuit accuses the federal government of mismanaging that money. As a result, the Indians contend that they are owed far more than what they have been paid.

Under the settlement, the government would pay to compensate the Indians for their claims of historical accounting irregularities and any accusation that federal officials mismanaged the administration of the land itself over the years.

The lawsuit may not have been this long-running, but it did span three presidencies, generate 22 published judicial opinions, and went before a federal appeals court 10 times.

Elouise Cobell, the lead plaintiff who filed the class-action lawsuit in 1996, said she believed that the Indians were owed more, but that it was better to reach an agreement that could help impoverished trust holders than to spend more years in court. She said she had originally expected the litigation to last only two or three years.

“We are compelled to settle by the sobering realization that our class grows smaller each day as our elders die and are forever prevented from receiving just compensation,“ Cobell said.

Attorney General Eric Holder on Tuesday said: “The United States could have continued to litigate this case, at great expense to the taxpayers. It could have let all of these claims linger, and could even have let the problem of fractionated land continue to grow with each generation. But with this settlement, we are erasing these past liabilities and getting on track to eliminate them going forward.”

Monday, December 7, 2009

Making Home Affordable Program… Treasury Finally Admits IT’S A DUD!

From Mandelman Matters

Posted: 06 Dec 2009 05:27 AM PST

Here’s what The New York Times said today about Treasury’s response to the news about the Making Home Affordable Program:

“AFTER months of playing pretend, the Treasury Department conceded last week that the Home Affordable Modification Program, its plan to aid troubled homeowners by changing the terms of their mortgages, was a dud. The 10-month-old program is going nowhere, the Treasury said, because big institutions charged with implementing it are dragging their feet.”

Gee, now there’s some breaking news for you… these guys at the Times, they’re true investigative news hounds, aren’t they? Next week I’m hoping to learn who won the Presidential Election in 2008.

Oh, and by the way, Treasury is nowhere near finished “playing pretend,” as the Times put it. Geithner is the best pretend player in the pretend business. He’s got all the banks pretending they’re solvent and profitable. He’s got them pretending they haven’t lost a dime on commercial property and that the homes they’ve foreclosed on but haven’t sold are still worth what they were when they were purchased or last refinanced.

The only problem is that all this pretending makes the banks look like they’re having a fabulous year, and so the $91 billion the banks have set aside to pay out in bonuses in just a few weeks is not being paid in pretend dollars. I wonder if I can pretend to pay my taxes next year.

The Times story then continued:

“After the government spent hundreds of billions of dollars bailing out banks, the Obama administration rolled out the $75 billion loan modification plan to show its support for beleaguered homeowners. But if the proof of the pudding is in the eating, homeowners are going hungry.”

Is that why Obama rolled out the Making Home Affordable plan? To show his support for the beleaguered homeowners? That’s fascinating. And here I had thought he rolled it out because if he didn’t all the banks would implode as prices continued to fall until everyone just started walking away, leaving the country in a depression and turning his presidency into something that would make G.W. Bush’s presidency look like FDR, Reagan, Kennedy and Clinton all rolled into one. I thought he might have done it because the people that put up the money to bail out the banks that caused this crisis are the same ones watching their homes dive off a cliff in terms of their value. No? Okay then, never mind.

The Times story then went on to point out the obvious:

“A stalled loan modification plan might not be worrisome if the foreclosure crisis were abating. Yet at the end of September, a record 14.4 percent of borrowers were either in foreclosure or delinquent on their mortgages, the Mortgage Bankers Association reported.”

Yes, I suppose that is true. If foreclosures weren’t the biggest problem in the country right now, a stalled loan modification program might be less worrisome. Thank you New York Times for pointing that out. I don’t know what I would have done with out you.

And they went on to say:

“It’s time for the government to acknowledge the flaws in its program and create one that might actually succeed. Only then will the supply of homes for sale, and the pressure on prices associated with that overhang, be reduced.”

Ya’ think? Oh what the heck, we’ve spent the last several years listening to the government not acknowledge much of anything in the way of “flaws,” so what the heck, I suppose it is time.

Personally, since my home has dropped in value by 45% over the last two years, from $900,000 to $500,000, I would have voted yes on the whole “create one that might actually succeed,” thing a tad sooner. Like maybe last year would have been nice. No problem, though… I understand that Obama’s been busy ending the Iraq War, closing Guantanamo Bay, creating millions of jobs, fixing health care, and ending the Don’t Ask, Don’t Tell policy in the military… oh yeah, and bringing home the Olympics for Chicago, don’t want to forget that major victory.

Okay, I don’t want to just sit here being sarcastic about what a monumental mess this whole rescue housing thing has been. Well, I’m not saying that it’s not fun, it is. But, I’d much prefer the government to get something right as related to housing. Just one thing would be nice.

The article talked about re-default rates being too high, which is no surprise when you consider the deflationary collapse we’ve been in for the last couple of years. But the article also pointed out another possible cause of the higher re-default rates:

“The terms of loan modifications also make them especially failure-prone because the government calculates “affordability” (how much mortgage debt a borrower can actually manage) in a highly unusual way — raising serious questions for the housing market over all and for the program’s effectiveness for borrowers.

For example, in devising what it considers an affordable mortgage payment, the program doesn’t account for all of a borrower’s debts — the first mortgage, second lien, credit card debt and automobile payments. Instead, it calculates affordability using only the borrower’s first mortgage payment, insurance and property taxes.

As a result, what may look like an affordable mortgage payment under the Treasury plan quickly becomes onerous when other debt is added. While the government may ignore a borrower’s second lien and revolving credit obligations, you can be sure the creditors that extended those loans will not. Re-defaults seem a likely result.”

Look, if I’m the only one who’s thinking what I’m about to say, would someone please email me so I can have someone put myself out of my misery? Just wait until I’m looking the other way, and smash me in the back of my head with a shovel. If you cared about me at all, you’d do it.

So, the government calculates affordability by not considering anything but the house payment, insurance and property taxes? And the Times finds this to be “highly unusual”? “Highly unusual”? And I suppose I’d be out of line here to suggest that a better phrase might be “incredibly stupid”? I’m sure. I know what you guys think… Mandelman Matters… he’s so sarcastic… he’s funny… I got such a laugh… well… check yourself, because that’s not funny and the fact that you’re not in a tearful rage and gassing up to stand in front of the White House and scream is monumentally sad. Highly unusual, my Aunt Fannie.

The Times story also discussed negative equity as being a leading cause of foreclosures. This is a view that is gaining momentum of late, and I find that both interesting and terribly important. From the very first article that I wrote on this topic, almost two years ago, I used the phrase “foreclosures breed foreclosures,” as a way to try to convey that once the dominoes start falling in the wrong direction, they feed on each other until one foreclosure becomes the proximate cause of the next.

The government, however, began by seeing the foreclosures as being caused by irresponsible sub-prime borrowers taking on too much debt as a result of lax, or even nonexistent lending standards. After a while, the word causing foreclosures was unemployment. Now… finally… our government is recognizing that it may just be negative equity that is driving the volume of foreclosures that much higher. It may have something to do with a recent study conducted at the Kellog School of Management that showed 17% of borrowers will walk away from their mortgages when they’re 45%+ underwater.

Whether negative equity or unemployment is the primary driver of today’s increasing number of foreclosures isn’t important, at least not to me. What is important is that we all come to understand that none of us is immune from being seriously harmed by the ongoing crisis in the housing market, and to the extent that it is allowed to continue to spread, there will be precious few among us that won’t look back and wish we had done more sooner.

As a nation, we don’t want to modify mortgages for the benefit of those in foreclosure, we need to modify mortgages for the benefit of those not yet in foreclosure. Or in other words, don’t modify my neighbor’s mortgage to help my neighbor, modify it to help me.

It helps to consider that mortgage modifications often are not in the best interest of the borrower, especially when the property in question is underwater by a lot. It’s easy to see that when you look at a guy with a $500,000 on a house worth $250,000. Lowering that guy’s interest rate a couple of points for five years and extending the loan out to 40 years… is not for his benefit from a financial perspective.

If you wanted to do something to benefit that borrower, tell him to stop making his payments, live in the house rent-free for as long as possible, and then hand the bank the keys and go rent a beautiful home for a couple of years, at half the amount owed now. That’s what would be in the best interests of the homeowner, not a modification in many instances.

Then there’s the issue of second mortgages and HELOCs. But, the Times story points out:

“Unfortunately, there is a $442 billion reason that wiping out second liens is not high on the government’s agenda: that is the amount of second mortgages and home equity lines of credit on the balance sheets of Bank of America, Wells Fargo, JPMorgan Chase and Citigroup.”

There are messy conflicts between banks or investors when one holds the first and another the second. But the Times story quotes the head of mortgage strategy at Amherst Securities Group, Laurie Goodman, and what she had to say on the topic of principal reductions.

“AN interesting data point: when banks do own all the mortgages on a property they seem to see the merit in principal reduction modifications. Studying second-quarter government data, the most recent available, Ms. Goodman found that when banks owned the loans, 30.5 percent of modifications reduced principal balances. When they service someone else’s loan or hold a second lien on the property, they rarely allow principal reductions.”

Good to know Ms. Goodman, I appreciate that and will look for it from now on.

Perhaps predictably, the Times story does wrap up with a brief paragraph on the perceived “moral hazard,” asking the question, “Why should someone who borrowed too much be given a reduction the amount owed, while someone else who did not act irresponsibly isn’t granted a modification?” To give you an idea of how things have changed, here’s how the story in the Times responded to the “moral hazard” point of view.

“But doing nothing also has hazards, the most obvious being continuing foreclosures, which nobody wants, and further declines in real estate prices that will hurt homeowners as well as investors.”

And, I would like to echo… CAUSE EVEN MORE FORECLOSURES, which ultimately will bankrupt the banks completely, to the point that there won’t be enough money on the planet to paper over the problem.

So, maybe the New York Times has been a tad slow catching on, but now that they’ve started the ball rolling in this regard, perhaps we’re that much closer to solving the problem.

Personally, I think it’s past time for Mr. Geithner to realize that he can’t pretend us into a recovery, and if he doesn’t soon show an understanding of that, then it’s time for the country to stop pretending and put someone into the job of Treasury Secretary that’s a realist… and will really fix what the investment bankers have destroyed.

Oh, and one more thing… sooner would be better than later.

Friday, December 4, 2009

This Little-Known Rule Could Send Gold to $10,000

By Porter Stansberry
Dec 2 2009 9:10AM

It's one of those numbers that's so unbelievable you have to actually think about it for a while...

Within the next 12 months, the U.S. Treasury will have to refinance $2 trillion in short-term debt. And that's not counting any additional deficit spending, which is estimated to be around $1.5 trillion.

Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5 trillion in only one year? That's an amount equal to nearly 30% of our entire GDP. And we're the world's biggest economy. Where will the money come from?

How did we end up with so much short-term debt? Like most entities that have far too much debt – whether subprime borrowers, GM, Fannie, or GE – the U.S. Treasury has tried to minimize its interest burden by borrowing for short durations and then "rolling over" the loans when they come due. As they say on Wall Street, "a rolling debt collects no moss."

What they mean is, as long as you can extend the debt, you have no problem. Unfortunately, that leads folks to take on ever greater amounts of debt... at ever shorter durations... at ever lower interest rates. Sooner or later, the creditors wake up and ask themselves: What are the chances I will ever actually be repaid? And that's when the trouble starts. Interest rates go up dramatically. Funding costs soar. The party is over. Bankruptcy is next.

When governments go bankrupt, it's called a "default." Currency speculators figured out how to accurately predict when a country would default. Two well-known economists – Alan Greenspan and Pablo Guidotti – published the secret formula in a 1999 academic paper. The formula is called the Greenspan-Guidotti rule.

The rule states: To avoid a default, countries should maintain hard currency reserves equal to at least 100% of their short-term foreign debt maturities. The world's largest money-management firm, PIMCO, explains the rule this way: "The minimum benchmark of reserves equal to at least 100% of short-term external debt is known as the Greenspan-Guidotti rule. Greenspan-Guidotti is perhaps the single concept of reserve adequacy that has the most adherents and empirical support."

The principle behind the rule is simple. If you can't pay off all of your foreign debts in the next 12 months, you're a terrible credit risk. Speculators are going to target your bonds and your currency, making it impossible to refinance your debts. A default is assured.

So how does America rank on the Greenspan-Guidotti scale? It's a guaranteed default.

The U.S. holds gold, oil, and foreign currency in reserve. It has 8,133.5 metric tonnes of gold (it is the world's largest holder). At current dollar values, it's worth around $300 billion. The U.S. strategic petroleum reserve shows a current total position of 725 million barrels. At current dollar prices, that's roughly $58 billion worth of oil. And according to the IMF, the U.S. has $136 billion in foreign currency reserves. So altogether... that's around $500 billion of reserves. Our short-term foreign debts are far bigger.

According to the U.S. Treasury, $2 trillion worth of debt will mature in the next 12 months. So looking only at short-term debt, we know the Treasury will have to finance at least $2 trillion worth of maturing debt in the next 12 months. That might not cause a crisis if we were still funding our national debt internally. But since 1985, we've been a net debtor to the world. Today, foreigners own 44% of all our debts, which means we owe foreign creditors at least $880 billion in the next 12 months – an amount far larger than our reserves.

Keep in mind, this only covers our existing debts. The Office of Management and Budget is predicting a $1.5 trillion budget deficit over the next year. That puts our total funding requirements on the order of $3.5 trillion over the next 12 months.

So... where will the money come from? Total domestic savings in the U.S. are only around $600 billion annually. Even if we all put every penny of our savings into U.S. Treasury debt, we're still going to come up nearly $3 trillion short. That's an annual funding requirement equal to roughly 40% of GDP.

Where is the money going to come from? From our foreign creditors? Not according to Greenspan-Guidotti. And not according to the Indian or Russian central banks, which have stopped buying Treasury bills and begun to buy enormous amounts of gold. The Indians bought 200 metric tonnes this month. Sources in Russia say the central bank there will double its gold reserves.

So where will the money come from? The printing press. The Federal Reserve has already monetized nearly $2 trillion worth of Treasury debt and mortgage debt. This weakens the value of the dollar and devalues our existing Treasury bonds. Sooner or later, our creditors will face a stark choice: Hold our bonds and continue to see the value diminish slowly, or try to escape to gold and see the value of their U.S. bonds plummet.

One thing they're not going to do is buy more of our debt. Which central banks will abandon the dollar next? Brazil, Korea, and Chile. These are the three largest central banks that own the least amount of gold. None owns even 1% of its total reserves in gold.

I examined these issues in much greater detail in the most recent issue of my newsletter, Porter Stansberry's Investment Advisory. Coincidentally, the New York Times repeated my warnings – nearly word for word – a few weeks ago. They didn't mention Greenspan-Guidotti, however... It's a real secret of international speculators.

My readers know that Greenspan-Guidotti means the U.S. is likely to have a severe currency crisis within the next two years. How high will gold go during this crisis? Nobody can say for sure. We've never been in the situation we are now. The numbers have never been so large and dangerous. But I wouldn't be surprised at all to see gold at $10,000 an ounce by 2012. Make sure you own some.

Good investing,

Porter Stansberry

Real Estate Appraiser sued because roof leaks 9 years later.

Claim of the Week -- Roof Leaks 9 Years After Appraisal
By Peter Christensen
We see many frivolous claims against appraisers. No matter how accurate or careful an appraiser may be, these sorts of claims will be filed anyway.

This particular claim relates to an appraisal for a purchase loan on a single family house in a mid-western state. The home was appraised for the lender at about $60,000. The homeowner has sent a demand letter to the appraiser demanding that the appraiser pay the homeowner about $9,000 to replace the roof and remove a tree that is causing damage to the roof. The homeowner alleges the roof recently started leaking and that the appraiser should have identified this condition in the appraisal report. Here's what makes the claim standout: the appraisal was done in 2000, 9 years and countless windstorms ago. So, here we have a non-client, non-intended user complaining about a roof that started leaking 9 years after the appraisal, a report which clearly stated that the appraiser was not a home inspector and that the report was prepared for the purpose of the mortgage transaction only.

Thursday, December 3, 2009

The Most Important Supreme Court Decision for Homeowners and Our Economy In Decades

Originally posted by Mandelman Matters Blog.

Cuomo v. Clearing House

There are some things that every single US citizen should know…


In 2003, the Office of the Comptroller of the Currency (“OCC”), proposed a regulation that would preempt essentially all state banking and financial services laws as applied to national banks and their operating subsidiaries. In other words, if a state’s governor, legislature or Attorney General didn’t like the way a bank was operating for whatever reason… tough cheese… not much could be done about it. The regulation meant that only federal agencies could do much of anything as far as the national banks were concerned.

The regulation was opposed by the National Conference of State Legislatures, which is an organization that’s supposed to make sure that state legislatures have a strong and cohesive voice in the federal system, but in this instance that “strong and cohesive” voice must have lacked strength and/or cohesiveness, because in 2004, the OCC got its way and their proposed regulation went into effect.

But that’s no way to start telling a story…

Our story begins in New York, way back in 2005…. the good old days, as it were… when, for the first time ever, the Federal Reserve released home mortgage data that included information on the race, sex and income of loan applicants. Well, New York’s then-Attorney General, Elliot Spitzer, apparently perused the Fed’s data and noticed that if a person had a high interest (read: sub-prime) mortgage, the odds were quite good that he or she was a minority.

In other words, Elliot got the idea in his head that maybe… just maybe, the banks were taking unfair advantage of inner city lower income types by forcing them into lousy loans just because they could. Crazy, I know. Where in the world would he get a wild-ass idea like that, do you suppose? Oh that’s right, from the Federal Reserve’s published data, I forgot. Anyway, Spitzer decided he’d better take a closer look into the lending practices of national banks.

Spitzer claimed authority to conduct his investigation under federal and state anti-discrimination and consumer protection laws, and sent “letters of inquiry” to the banks asking for information related to their lending practices.

Now, here’s where it starts to get weird…
In response to Spitzer’s “letter of inquiry,” the Clearing House Association (“CHA”), which can be described as a “consortium,” (or perhaps “cabal” is a better word) of national banks,” filed a lawsuit against Spitzer, asking the court to issue an injunction stopping Spitzer from issuing any subpoenas in his investigation. Not to be left out, the OCC brought a similar action and the two suits were combined into one. Obviously, somebody didn’t want the AG of NY looking at any bank lending practices.

In The National Bank Act it states: “No national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice or such as shall be, or have been exercised or directed by Congress or by either House thereof.”

The courts agreed with the position taken by the CHA and OCC, issuing a permanent injunction against Attorney General Spitzer that prevented him from issuing any subpoenas or demanding an inspection of any national banks’ records. The New York Attorney General was not going to be allowed to take a closer look at any of the bank’s lending practices. The court held that the phrase “visitorial powers” is ambiguous, but that the OCC’s interpretation of the phrase, in that it preempted the states from enforcing state laws on national banks, was reasonable and therefore entitled to something called “Chevron deference”.

“Chevron deference” is not a new fuel additive that keeps your car’s engine clean. The term does, however, come from a U.S. Supreme Court decision involving the oil and gas company, Chevron.

Chevron deference is considered a doctrine of administrative law. It states that when a law is judged to be ambiguous, but it falls within the subject matter jurisdiction of a federal agency, then as long as the agency’s interpretation is considered reasonable, then it’s the final word on the subject. In other words, when no one can agree what a law means, and you let a federal agency decide the answer, it’s known as “Chevron deference”.

Spitzer was never one to be easily dissuaded; he appealed the decision, but lost again. And that was the end of Elliot’s go at the national banks.

Then, in 2007, a Supreme Court decision again confirmed OCC’s preemption of state laws and regulations as related to banks, when the court ruled that Wachovia Mortgage Corporation, which was a wholly owned subsidiary of Wachovia Bank, was not subject to regulation by the Michigan Office of Insurance and Financial Services.

Still with me? Hang in there… it’ll be worth it.

Cuomo v. Clearing House: This Changes Everything

Fast forward to 2009, New York’s Attorney General is now Andrew Cuomo and he’s decided to pick up where Elliot left off when he was rudely interrupted spending money on a hooker. AG Cuomo basically argued that the OCC’s interpretation so significantly altered the balance of power between state and federal governments, that it required a clear statement by Congress. He even questioned whether “visitorial powers” were involved in his actions. All he wanted to do was enforce state laws.

Cuomo also argued that the OCC’s interpretation made national banks immune from any state enforcement of consumer protection and/or antidiscrimination laws. He said that because the OCC doesn’t have the ability and expertise to emulate the roles of state attorneys general, it should not be permitted to preempt the states’ traditional role, protecting consumers’ interests.

It’s the Supreme Court we’re talking about here, so there was a fair amount of arguing back and forth, but to make a long story at least somewhat shorter, the bottom-line is that he won… Cuomo did it! The Supreme Court finally overturned their previous decisions on the OCC interpretation and as of this past June 28th ruled 5-4 that federal banking regulations did not preempt the ability of states to enforce their own fair-lending laws.

In reaching that decision, the court opened up the national banks to being investigated by state attorneys general related to violations having to do with state consumer protection laws. At that moment, the bankers knew, as the song says, that they had trouble… right here in River City.

And that, ladies and germs, is why you’ve got to love the good old judicial branch, with their lifetime appointments. It may not sound like much, but at least we know that there are five people with power in our government that don’t concern themselves with the banking lobby’s highly influential and well-funded influence peddlers.

State Attorneys General Start Your Engines…

Although the media has only recently started to catch on, the impact of the court’s decision was immediately understood by state Attorneys General across the country, many of whom have already started assigning their staffs to the exploration of how their new-found power might be used. Unquestionably, their first stop is the foreclosure crisis, although future efforts are likely to include other lending related issues such as credit cards, and the like.

Arizona’s AG, Terry Goddard, is one of the attorneys general leading the pack. Arizona continues to be one of the states hardest hit by foreclosures, and Goddard has had enough with the lip service of lenders and servicers. Foreclosures across his state now consistently exceed 7,000 a month.

Lenders and servicers have been asking Goddard to encourage homeowners to contact them directly, so that’s exactly what he’s done to-date. But the homeowners that try to contact their banks, just end up calling the AG back, basically saying they’d likely have more success obtaining a loan modification by calling a cactus.

According to a recent story in The New York Times, Goddard said: “People call and get the runaround. Their paperwork gets lost. It’s time to stop this absurd dance.”

The Times’ story quotes Goddard as saying that he and other AGs have tried to be persuasive with the lenders and servicers in an effort to get them to be a meaningful part of a solution to the crisis that they had such a large role in creating. But Goddard says: “… their waterfall of excuses, the abysmal numbers of modifications, tells us that persuasion is not working. As a result, we’re moving much closer to litigation.”

Goddard and his peers in other states are considering lawsuits accusing the banks of creating and marketing millions of bad loans, and failing to fulfill their promises related to loan modifications. Such lawsuits would have been impossible prior to June’s Supreme Court decision in Cuomo v. The Clearing House.

Every state has laws that prohibit fraud in consumer lending, and states are now exploring the idea of litigation alleging that the banks engaged in massive fraud against consumers by marketing unintelligible loans that they knew would be impossible for most people to repay. Banks did so to earn what added up to billions in short-term fee income from originating the loans, and then quickly sold the loans to government entities, like Fannie and Freddie, who then required costly taxpayer funded bailouts.

Cranky Bankers…

The banks and their powerful lobbies, it should go without saying, are none too pleased with the recent developments inspired by the Supreme Court’s decision. The Mortgage Bankers Association, one of those lobbies, declined to comment on the situation when asked by The New York Times, but spokesperson John Mechem had the unmitigated audacity to warn… or rather, threaten that consumers would be the ones that end up paying for any increased legal activity.

As quoted by the Times, Mechem said: “Lawsuits add to the patchwork of regulations that increases compliance costs to lenders, which in turn increases the cost of credit to borrowers.”

What a jackass this guy is. I mean, I don’t think I can remember hearing anyone say anything quite that offensive, since perhaps that little pocket-knife rattling moron in Iran said something about taking on the world over nuclear power. I’m not proud of what I’m about to admit, but when I read what Mechem said, all I could think of was kicking his insipid little ass all around a parking lot.

How dare you, Mr. Mechem? Who in the world do you think you are? Did you really just respond to the possibility of state lawsuits designed to right the unthinkable wrongs committed against American consumers and our society as a whole by those who write your paycheck, by saying that we better not because your guys will make us all pay? Did you think that would get us to back down and let your guys off the hook? You’re an idiot, Mechem, a real life, honest to goodness idiot.

And not only that, but did you really threaten us with increasing the cost of credit? Seriously? Seriously?

How in the world could taxpayers possibly ever pay more for the cost of credit than we’re paying NOW as a result of what the banks did over the last so many years? You mean that you’ll make us pay more than that? More than the $700 billion in TARP, and the countless TRILLIONS in free loans?

What are the banks going to do, charge 70% on credit card balances? More than 390% on hard money loans, the new limit set by the credit card reform legislation that you weakened before allowing it to pass through the legislature earlier this year? How about more than $25 for a $2.50 overdraft?

Go ahead, Mechem, go tell the bankers of this country to just try to punish us by heading down such a path, and the next time I personally borrow a nickel will be… hmmm… let’s see… perhaps when pigs fly, comes to mind, which will be roughly the same year your pals get their next zillion dollar bonus. I’d rather live in a tent under the 405 Freeway and keep my retirement savings in a Hills Brothers coffee can, then back down to your bullying threats.

The Banking Lobby Shifts Into High Gear…

Every single American should know: If the banks have anything to do with it, the American consumer’s victory won’t last long. The banks are hot and heavy lobbying Washington D.C. to make this problem go away. They want Congress to block the states from being able to take more aggressive legal action. They want Congress to preempt any state laws that are more restrictive than federal statutes.

In fact, just two weeks ago, the House Financial Services Committee voted to give the federal government the power to stop states from regulating the behavior of national banks in certain instances. The new rule says that the OCC can override the states in cases where the OCC finds that a state’s laws interfere with regulatory policies at the federal level. Not the end of the world, perhaps, but it’s sure to represent only the beginning of the bank’s efforts to dismantle any laws that attempt to level the playing field or place them at risk of being held accountable for what they’ve done or may do in the future.

When it comes to the banks, you can count on the fact that they only want to play in a game where it’s heads they win and tails we lose.

Goddard says that after the Cuomo v. Clearing House decision he had a virtual parade of bank executives coming through his offices expressing the desire to better address the 7,000 monthly foreclosures by improving the loan modification process. But, Goddard says that the bankers were unwilling or unable to provide him with any of the information he asked for, such as how many and what types of loans they have in his state.

Goddard is far from alone in his thoughts about the banks and servicers. Illinois Attorney General Lisa Madigan brought a civil rights suit against Wells Fargo. When the suit started, the Wells Fargo branches were operating under a state charter, and the bank responded to the state’s subpoena. But soon, the Illinois branches were moved and placed under control of Wells’ national bank charter and that was the end of that. Wells Fargo immediately informed the state of the change, stopped cooperating with the subpoenas, and basically said: “But thank you for playing.”

Madigan says that this sort of maneuvering has made it easy for those in the banking industry to hide misconduct and avoid prosecution for years. And Ohio’s Attorney General, Richard Cordray was quoted by the Times as saying: “For the better part of eight years, the federal regulators were not being aggressive, and at the same time we were disabled. There was nothing holding back irrational and irresponsible practices.”

Wake up, America. Or as sure as I’m writing this, defeat will be snatched from the jaws of victory…

So far this year, while most Americans have seemingly been preoccupied with other things, the banking lobby has managed to have its way with every single piece of legislation our legislature has considered or ultimately passed. The Democrats, and some Republicans, and supposedly President Obama wanted to reform the bankruptcy code to allow judges to write down mortgages on primary residences for homeowners filing bankruptcy… but the banking lobby, after spending a reported $45 million in lobbying efforts, killed the legislation… twice.

The credit card reform bill came in like a lion, but when the banking lobby was done with it, was passed into a lamb of a law. The controversial Home Valuation Code of Conduct, or HVCC, which gives the banks greater control of appraisals, and removes all the other parties to a real estate transaction from the picture, was adopted nationally without it even going though the legislative process.

H.R. 1728, which has been named the Mortgage Reform and Anti-Predatory Lending Act, neither reforms mortgages, nor does it meaningfully address what most people think of as predatory lending. Instead, this bill, which has already passed the House and is now in the Senate, limits the rules and increases the costs born by individuals when selling homes they themselves own.

And, as far as passing any legislation even remotely designed to prevent the global meltdown of our financial markets in the future by tightening up regulatory oversight of the commercial and investment banks in this country… well, we’ve done absolutely nothing in that regard. Even the creation of a new federal agency, whose purpose would be to protect consumers from the often egregious acts of banks and other financial institutions, has been moving though our legislature with the speed and grace of a wild boar moving whole, through the digestive tract of a python.

There should be no question in anyone’s mind at this point that our government is being driven by the financial oligarchy that has amassed too much legislative clout over the last thirty years of bull market. What’s in the best interests of Wall Street should no longer be seen as being in the best interests of the country as a whole. And if we don’t let our elected representatives know that we are watching and will not tolerate our elected officials blindly voting according to the wishes of the banking lobby, then our economy will not begin the recovery we’re hoping for, and frankly, we will deserve everything we collectively get.

The United States Supreme Court has decided that a state can look into and prosecute financial institutions that operate as part of our national banking system when they’re suspected of having broken the laws of that state. And that will be the law of our land, unless we say nothing, in which case I have no doubt whatsoever, that the banking lobby will persuade Congress to pass legislation that will render the court’s ruling moot and let lenders and servicers off the hook for wrong doing yet again.

It’s up to us, the voters, as we enter the coming election year, to make sure our elected representatives hear our voices loud and clear:

Vote as the banks tell you to vote and there’s not enough money in the world to get you reelected, but vote in the best interests of the people of this country, and you won’t need the banking lobby’s money to get reelected.

Iowa’s AG, Tom Miller, seemed downright thrilled with the Supreme Court’s decision, by the way. The story in the Times quoted Mr. Miller as enthusiastically saying:

“We’re back on the field. That’s really important. Certainly there will be some litigation.”

I sure hope so, Mr. Miller, I certainly do hope so.

Tuesday, December 1, 2009

Fed to Conduct ‘Small Scale’ Triparty Reverse Repos

Nov. 30 (Bloomberg) -- The Federal Reserve said it will test one of the tools for an eventual withdrawal of the central bank’s unprecedented monetary stimulus while stressing that the trials themselves don’t represent any change in policy.

The New York Fed said it will conduct “small scale, real value” three-way reverse repurchase transactions in coming weeks. The tests are “a matter of prudent advance planning by the Federal Reserve,” the statement said, and “no inference should be drawn about the timing of any change in the stance of monetary policy in the future.”

Policy makers led by Fed Chairman Ben S. Bernanke are considering how to withdraw the more than $1 trillion they have pumped into the financial system to combat the deepest recession since the 1930s. Along with raising the overnight bank lending rate, Fed officials have said they may use reverse repos, pay interest on excess bank reserves and sell securities directly to investors to withdraw or neutralize cash in the banking system.

“We don’t think it’s any indication that they’re likely to implement an exit strategy soon, or even in the next several quarters,” said Michael Pond, an interest-rate strategist in New York at Barclays Capital Inc., one of 18 primary dealers that trade with the Fed. “It’s important for the Fed to make sure the market is aware that the tools they do have work, even if they’re not ready to use them yet.”

The Fed cut its benchmark interest rate to as low as zero last December and adopted asset purchases as its main policy tool. The Fed is buying $1.25 trillion of agency mortgage-backed securities and about $175 billion of housing agency debt. The Fed in October completed a $300 billion program of U.S. Treasury securities purchases.

Rate Outlook

The central bank probably won’t raise its benchmark interest rate above 0.25 percent until August, according to the median forecast of 45 economists surveyed by Bloomberg News.

The Fed on Nov 4. repeated it will keep interest rates near zero for “an extended period” and specified for the first time that policy will stay unchanged as long as inflation expectations are stable and unemployment fails to decline.

Payrolls in the U.S. probably fell by 120,000 workers this month, according to the median of 67 analysts surveyed by Bloomberg News ahead of a Dec. 4 Labor Department report. The unemployment rate probably held at 10.2 percent, a 26-year high.

The world’s largest economy has lost 7.3 million jobs since the recession began in December 2007. The jobless rate is projected to exceed 10 percent through the first half of next year, according to the median forecast of economists surveyed this month.

Treasury Notes

Treasury notes were little changed today. The 10-year note’s yield increased one basis point, or 0.1 percentage point, to 3.21 percent at 1:36 p.m. in New York.

The reverse repo transactions are being conducted to ensure “operational readiness” at the Fed, clearing banks and primary dealers, today’s statement said. They will have “no material impact” on the availability of reserves or on market interest rates, it said.

“You could look at it as a case of due diligence by the Fed,” said Ward McCarthy, chief financial economist at Jefferies & Co., also a primary dealer.

In a reverse repo, the Fed loans securities for a set period. At maturity, the securities are returned to the Fed, and the cash to the dealers.

Market Rates

The transactions will be conducted at current market rates, and the aggregate amount outstanding “will be very small relative to the level of excess reserves,” today’s announcement said. The results will be posted on the New York Fed’s Web site and will be listed as liabilities on the Fed’s consolidated balance sheet statements.

The New York Fed said on Oct. 19 that it was working with market participants on how it would use reverse repurchase agreements to help drain cash. It also said the central bank was considering expanding the counterparties for reverse repo operations beyond the 18 primary dealers.