President Obama Signs Executive Order Freezing All Iranian Government Assets Held in US Banks

File Photo of Iran Central Bank in Tehran (Subject to license)

It seems like the long-threatened war with Iran is going to happen at some point soon. There is simply too much saber-rattling for it not to happen. Case in point, the latest executive order from President Obama that freezes Iranian assets in US banks. Once money is frozen, it usually isn't too long before the bombs will be falling!

Please note that there is no Executive Order number yet, but I will add it when it is actually published.

###

The White House

Office of the Press Secretary
For Immediate Release
February 06, 2012
Executive Order -- Blocking Property of the Government of Iran and Iranian Financial Institutions

EXECUTIVE ORDER
- - - - - - -
BLOCKING PROPERTY OF THE GOVERNMENT OF IRAN AND IRANIAN FINANCIAL INSTITUTIONS

By the authority vested in me as President by the Constitution and the laws of the United States of America, including the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (IEEPA), the National Emergencies Act (50 U.S.C. 1601 et seq.), section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 112-81) (NDAA), and section 301 of title 3, United States Code,

I, BARACK OBAMA, President of the United States of America, in order to take additional steps with respect to the national emergency declared in Executive Order 12957 of March 15, 1995, particularly in light of the deceptive practices of the Central Bank of Iran and other Iranian banks to conceal transactions of sanctioned parties, the deficiencies in Iran's anti-money laundering regime and the weaknesses in its implementation, and the continuing and unacceptable risk posed to the international financial system by Iran's activities, hereby order:

Section 1

(a) All property and interests in property of the Government of Iran, including the Central Bank of Iran, that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person, including any foreign branch, are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in.

(b) All property and interests in property of any Iranian financial institution, including the Central Bank of Iran, that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person, including any foreign branch, are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in.

(c) All property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person, including any foreign branch, of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in: any person determined by the Secretary of the Treasury, in consultation with the Secretary of State, to be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order.

Section 2

I hereby determine that the making of donations of the type of articles specified in section 203(b)(2) of IEEPA (50 U.S.C. 1702(b)(2)) by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to section 1 of this order would seriously impair my ability to deal with the national emergency declared in Executive Order 12957, and I hereby prohibit such donations as provided by section 1 of this order.

Section 3

The prohibitions in section 1 of this order include but are not limited to: (a) the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to this order; and


(b) the receipt of any contribution or provision of funds, goods, or services from any such person.

Section 4

(a) The prohibitions in section 1 of this order apply except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and notwithstanding any contract entered into or any license or permit granted prior to the effective date of this order.

(b) The prohibitions in section 1 of this order do not apply to property and interests in property of the Government of Iran that were blocked pursuant to Executive Order 12170 of November 14, 1979, and thereafter made subject to the transfer directives set forth in Executive Order 12281 of January 19, 1981, and implementing regulations thereunder.

Section 5

(a) Any transaction by a United States person or within the United States that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions set forth in this order is prohibited.

(b) Any conspiracy formed to violate any of the prohibitions set forth in this order is prohibited.

Section 6

Nothing in section 1 of this order shall prohibit transactions for the conduct of the official business of the Federal Government by employees, grantees, or contractors thereof.

Section 7

For the purposes of this order:

(a) the term "person" means an individual or entity;

(b) the term "entity" means a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization;

(c) the term "United States person" means any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States;

(d) the term "Government of Iran" means the Government of Iran, any political subdivision, agency, or instrumentality thereof, including the Central Bank of Iran, and any person owned or controlled by, or acting for or on behalf of, the Government of Iran;

(e) the term "Iran" means the territory of Iran and any other territory or marine area, including the exclusive economic zone and continental shelf, over which the Government of Iran claims sovereignty, sovereign rights, or jurisdiction, provided that the Government of Iran exercises partial or total de facto control over the area or derives a benefit from economic activity in the area pursuant to international arrangements; and

(f) the term "Iranian financial institution" means a financial institution organized under the laws of Iran or any jurisdiction within Iran (including foreign branches), any financial institution in Iran, any financial institution, wherever located, owned or controlled by the Government of Iran, and any financial institution, wherever located, owned or controlled by any of the foregoing.

Section 8

For those persons whose property and interests in property are blocked pursuant to this order who might have a constitutional presence in the United States, I find that because of the ability to transfer funds or other assets instantaneously, prior notice to such persons of measures to be taken pursuant to this order would render those measures ineffectual. I therefore determine that for these measures to be effective in addressing the national emergency declared in Executive Order 12957, there need be no prior notice of a listing or determination made pursuant to section 1 of this order.

Section 9

The Secretary of the Treasury, in consultation with the Secretary of State, is hereby authorized to take such actions, including the promulgation of rules and regulations, and to employ all powers granted to the President by IEEPA as may be necessary to carry out the purposes of this order, other than the purposes described in section 11. The Secretary of the Treasury may redelegate any of these functions and authorities to other officers and agencies of the United States Government consistent with applicable law. All agencies of the United States Government are hereby directed to take all appropriate measures within their authority to carry out the provisions of this order.

Section 10

The Secretary of the Treasury, in consultation with the Secretary of State, is hereby authorized to exercise the functions and authorities conferred upon the President by section 1245(d)(1)(A) of the NDAA and to redelegate these functions and authorities consistent with applicable law. The Secretary of the Treasury, in consultation with the Secretary of State, is hereby further authorized to exercise the functions and authorities conferred upon the President by section 1245(g)(1) of the NDAA to the extent necessary to exercise the other functions and authorities delegated in this section and may redelegate these functions and authorities consistent with applicable law.

Section 11

The Secretary of State, in consultation with the Secretary of the Treasury, the Secretary of Energy, and the Director of National Intelligence, is hereby authorized to exercise the functions and authorities conferred upon the President by section 1245(d)(4)(D) of the NDAA and to redelegate these functions and authorities consistent with applicable law. The Secretary of State, in consultation with the Secretary of the Treasury, is hereby further authorized to exercise the functions and authorities conferred upon the President by sections 1245(e)(1) and 1245(e)(2) of the NDAA and to redelegate these functions and authorities consistent with applicable law. The Secretary of State, in consultation with the Secretary of the Treasury, is hereby further authorized to exercise the functions and authorities conferred upon the President by section 1245(g)(1) of the NDAA to the extent necessary to exercise the other functions and authorities delegated in this section and may redelegate these functions and authorities consistent with applicable law.

Section 12

This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

Section 13

The measures taken pursuant to this order are in response to actions of the Government of Iran occurring after the conclusion of the 1981 Algiers Accords, and are intended solely as a response to those later actions.

Section 14

This order is effective at 12:01 a.m. eastern standard time on February 6, 2012.

BARACK OBAMA

FLASHBACK: Riots Across United States of America During the Great Depression (Video)

I have never seen any of this above video footage of riots throughout the Midwest and Northeast States in United States of America during the 1930s. In fact, it looks similar to the some of the protests that are occurring in the Occupy Movement that has spread around the world in recent weeks. The protesters in the 1930s video appear to be protesting and destroying the means of production (manufacturing) whereas the Occupy movement appear to be protesting the means of financing (banking). The 1930s videos also appear to be more violent.

I highly recommend taking a few minutes and watching a bit of American history.

Source: YouTube

FLASHBACK: Rick Perry Champions NAFTA Support During Speech at South Texas Farm & Ranch Show

I was doing some archival research on ol' Governor Rick Perry and I happened to come across this article from The Victoria Advocate (October 6, 1993) where the Governor and current GOP "frontrunner" praises NAFTA. I do not know where Perry stands on NAFTA, but I am quite sure that most Tea Party members oppose NAFTA and would support its immediate repeal.

And if the current-Governor Perry now believes that NAFTA is bad for the country, then this would be just another example of Perry flip-flopping and completely changing his position from one side to the other. While I don't doubt that people can change, do people usually change so drastically like Mr. Perry?

By increasing U.S, agricultural trade alone, the North American Free Trade Agreement would create 50,000 more jobs in the country, according to Texas Agriculture Commissioner Rick Perry.

"NAFTA is the largest job stimulus packet to come along in this decade," Perry said during his keynote address at the South Texas Farm & Ranch Show in Victoria.

And if you really want to laugh, check out this 2009 clip from The Alex Jones Show where Jones imitates Perry when Perry was talking about how to cook a frog in a pot!

Ford Motor Company to Build $1 Billion Automotive Manufacturing & Engineering Complex in Sanand India

File photo: Ford Motor Company assembly line

President Obama will be giving a speech on jobs this Thursday. Many people want him to propose big-idea projects and other manufacturing wonders that will produce thousands of jobs. Ford Motor Company is jumping the gun on El Presidente and has announced a new $1 billion automotive and engineering complex! The complex is expected to create 5,000 or so jobs.

Unfortunately, this complex isn't in the USA - it's in India! While there is nothing to stop Ford from making money in other territories, it is sad that Ford isn't building $1 billion factories in the United States.

US auto giant Ford has started construction on a $1 billion manufacturing and engineering complex in India as it bets on the country to help drive global growth, a company statement said on Tuesday...

...The complex highlights the automaker's plan "to aggressively grow the Ford brand in India," said Ford India president Michael Boneham.

The official press release from Ford is below.

Source: FRANCE 24

###

Ford India Sales Up 45 Percent for the Year; Announces New Plants in Gujarat

* Ford India has sold 71,347 wholesale and export units so far this year, representing year-over-year growth of 45 percent
* The company is investing Rs 4000 crore (approx. USD 1 billion) in India to build vehicle manufacturing and engine plants in Sanand, Gujarat
* The recently launched All-New Fiesta expands Ford’s portfolio and offers a best-in-class experience to customers

NEW DELHI, India, 1 August, 2011 – Ford India’s sales performance this year reinforces its decision to invest approximately USD 1 billion to build a new integrated manufacturing facility in Gujarat (emphasis added).

Ford India, which just launched the All-New Fiesta, sold 71,347 wholesale and export vehicles from January to July 2011, compared to 49,131 units sold during the same period last year – a 45 percent increase year-over-year.

In July 2011, the company had combined wholesales and exports of 10,706 units, compared to 9,666 units in July 2010.

As part of its aggressive global expansion, Ford India and the State of Gujarat signed a Memorandum of Understanding (MoU) in Gandhinagar on July 28 to build a state-of-the-art vehicle manufacturing plant and an engine plant on a 460-acre site in Sanand.

“These are exciting times for Ford in India,” said Michael Boneham, president and managing director, Ford India. “We are investing in the future and reinforcing our long-term commitment to India by building two new plants in Gujarat and by adding the All-New Fiesta to our portfolio. The All-New Fiesta is the first of eight new vehicles we will bring to India by mid-decade.”

Fuel-efficient diesel variants of Ford vehicles have been in high demand, due to rising fuel prices, creating a customer waiting list. Ford India is expanding its engine plant in Chennai and working with diesel engine part suppliers in order to better meet the strong demand.

“We appreciate our customers’ patience as we work with our suppliers to remove capacity constraints, and ensure we can meet the ever increasing demand for Ford products,” added Boneham. “The All-New Fiesta is a great addition to our portfolio and has had a tremendous reaction from customers so far. We are pleased to have sold over 70,000 vehicles to local and international markets this year.”

The All-New Fiesta, which went on sale July 14, brings many segment-leading technological firsts, such as a voice-controlled in-car entertainment and climate system and Cruise Control, in a stylish, fuel-efficient package.

Led by a surging demand for the compact Ford Figo, Ford India exported more than 3,200 cars to 26 markets, including seven new ones, in July. “It is great to see that in addition to selling over 100,000 units here in India, overseas demand for Figo is high and consistently boosting our exports,” Boneham concluded.

About Ford in India
Established in 1995, Ford India is a wholly owned subsidiary of Ford Motor Company, a global automotive industry leader. Ford India manufactures and distributes automobiles and engines made at its modern integrated manufacturing facilities at Maraimalai Nagar, near Chennai. The company’s models include the Figo, Fiesta Classic, Endeavour and the recently launched All-New global Fiesta.

Ford’s operations in the country also include Global Business Services, comprised of Ford Business Services Center and Ford Technology Services India. Located in Chennai and Coimbatore, these units support Ford globally in the areas of IT, accounting and finance, financial services and automotive operations support, global analytics and engineering services. Ford’s businesses in India employ 10,000 hard-working, dedicated men and women.

For more information, visit www.india.ford.com

Federal Reserve Prepares for Financial Default By United States of America!

This blog post is neither sponsored nor commissioned by the Fed!

Please note that this story about the Federal Reserve preparing for a U.S. default is from a week ago, so it shows that the Federal Reserve had little hope that our political leaders would reach an agreement on the debt ceiling. As of this writing, the lawmakers have not reached an agreement on the debt ceiling.

Nevertheless, this is just like a WWE match where it's all about suspense and drama! I still believe that the lawmakers will reach some last minute B.S. deal to avoid having a default occur on their respective watches, but anything is always possible.

As the wrangling over the U.S. debt ceiling continues in Washington, the Federal Reserve is making preparations in the event that Congress and President Obama fail to reach an agreement by the August 2 deadline...

"We are in contingency planning mode," Charles Plosser, president of the Philadelphia Federal Reserve Bank, told Reuters...

Source: globalpost

United States Postal Service Suspends FERS Pension Contributions

Will the post office go out of business or will it receive a bailout? At this point, I do not see any hope for the USPS except for one of those two options. It is too difficult for the USPS to operate without loss in the digital age. I once used the postal service on a regular basis. I infrequently use the USPS now and I know that I am not alone. The USPS is cutting costs in an effort to stay afloat including suspension of its pension contributions by instituting a cash conservation plan.

###

U.S. Postal Service Institutes Cash Conservation Plan

Payment to FERS suspended

WASHINGTON — The U.S. Postal Service has informed the Office of Personnel Management (OPM) of its intention to suspend its employer’s contributions for the defined benefit portion of the Federal Employees Retirement System (FERS) to conserve cash and preserve liquidity. The Postal Service has a FERS account surplus valued at $6.9 billion.

“We will continue to transmit to OPM employees’ contributions to FERS and also will continue to transmit employer automatic and matching contributions and employee contributions to the Thrift Savings Plan,” said Anthony Vegliante, chief human resources officer and executive vice president.

The Postal Service pays about $115 million every other week to OPM for the FERS annuity. Suspension of payments, effective June 24, will free about $800 million in the current fiscal year.

The Postal Service continues to cut costs significantly with initiatives to reduce the size of its labor force, the number of mail processing facilities and administrative overhead. Over the last four fiscal years, the Postal Service has reduced its size by 110,000 career positions and saved $12 billion in costs.

The Postal Service also is generating new revenue by opening cost-effective new retail locations in places where people already shop, including grocery stores, drug stores and office supply stores, and introducing other new product and pricing initiatives.

Despite significant cost reductions in areas within its control, and even with this emergency action, the Postal Service needs Congress to enact legislation that would do the following to return the Postal Service to financial stability:

• Eliminate the current mandates requiring retiree health benefit pre-payments.
• Allow the Postal Service to access Civil Service Retirement System and FERS overpayments.
• Give the Postal Service the authority to determine the frequency of mail delivery.
• The Postal Service receives no tax dollars for operating expenses, and relies on the sale of postage, products and services to fund its operations.

We’re everywhere so you can be anywhere: www.uspseverywhere.com

# # #

Federal Reserve to Hold Press Conference for First Time Ever!

**UPDATE - April 27, 2011 - I'm dropping a fat update of the below post for today's Federal Reserve press conference including the official media statement, time and place of the press conference. I have not found a direct link to where you can view the press conference, but the press release says that Fed's statement will not be released until 12:30pm, so perhaps a video link will be active at that time.

For immediate release
Chairman Ben S. Bernanke will hold press briefings four times per year to present the Federal Open Market Committee's current economic projections and to provide additional context for the FOMC's policy decisions.

In 2011, the Chairman's press briefings will be held at 2:15 p.m. (Eastern) following FOMC decisions scheduled on April 27, June 22 and November 2. The briefings will be broadcast live on the Federal Reserve's website. For these meetings, the FOMC statement is expected to be released at around 12:30 p.m., one hour and forty-five minutes earlier than for other FOMC meetings.

The introduction of regular press briefings is intended to further enhance the clarity and timeliness of the Federal Reserve's monetary policy communication. The Federal Reserve will continue to review its communications practices in the interest of ensuring accountability and increasing public understanding.

**

I wonder what piece of news the Federal Reserve will reveal on April 27. It must be important, because this will be the first time that the Federal Reserve has ever held a press conference in its history. Will Bernanke announce the end of the dollar? The IMF is taking control of the Federal Reserve? The United States has defaulted on its debts? The Federal Reserve will keep printing as much money as it wants? Your guess is as good as mine.

For the first time for a Federal Reserve chief, after the next Open Market Committee meeting on Wednesday, Chairman Ben Bernanke will hold a press conference to review the bank's latest maneuver, which may be the least surprising part of the show.

Source: UPI.com

Central Bank of Ireland to Begin Printing €51 Billion of Its Own Money!

Ireland may be a canary in the coal mine for the state of the European economy like Iceland was a couple of years back such that the Irish financial state may be a predictor of future economic shocks in the rest of the European Union. Fake money is never a good thing for an economy and similar to our Federal Reserve, the Central Bank of Ireland is about to start printing its own money. As the Wu-Tang Clan once said, "Cash rules everything around me."

EMERGENCY lending from the ECB to banks in Ireland fell in December, the first decline since January 2010, but only because the Irish Central Bank stepped up its help to banks.

The Irish Independent learnt last night that the Central Bank of Ireland is financing €51bn of an emergency loan programme by printing its own money.

Source: Independent.ie

Treasury Secretary Timothy Geithner Says United States of America is Insolvent

Insolvency means that an entity cannot pay its debts owed. Is the United States currently insolvent or soon to be insolvent? Secretary Geithner seems to believe so and says so in a letter to Congress regarding raising the statutory debt limit. Specifically, Geithner says, "Failure to raise the limit would precipitate a default by the United States." A default by the United States means that the country would not be able to pay its debts when the debts came due. Therefore, the country would be insolvent.

Nevertheless, I argue that the country is currently insolvent, because the statutory debt ceiling is an arbitrary number as determined by Congress that does not appear to have any basis except for allowing the country to continue operating in its current financial fantasy.

###

Secretary Geithner Sends Debt Limit Letter to Congress

By: Erika Gudmundson

1/6/2011

Page Content

Today, Secretary Geithner sent the following letter to Congress regarding the debt limit (download the signed letter here):

January 6, 2011

The Honorable Harry Reid
Majority Leader
United States Senate
Washington, DC 20510

Dear Mr. Leader:

I am writing in response to your request for an estimate by the Treasury Department of when the statutory debt limit will be reached, and for a description of the consequences of default by the United States.

Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States. Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses and could lead to the loss of millions of American jobs. Even a very short-term or limited default would have catastrophic economic consequences that would last for decades. Failure to increase the limit would be deeply irresponsible. For these reasons, I am requesting that Congress act to increase the limit early this year, well before the threat of default becomes imminent.

As you know, in February of 2010 Congress passed legislation to increase the debt limit to $14.29 trillion. As of this writing, the outstanding debt that is subject to the limit stands at $13.95 trillion, leaving approximately $335 billion of “headroom” beneath the current limit. Because of the inherent uncertainty associated with tax receipts and refunds during the spring tax filing season, as well as other variable factors, it is not possible at this point to predict with precision the date by which the debt limit will be reached. However, the Treasury Department now estimates that the debt limit will be reached as early as March 31, 2011, and most likely sometime between that date and May 16, 2011. This estimate is subject to change depending on the performance of the economy, government receipts, and other factors. This means it is necessary for Congress to act by the end of the first quarter of 2011.

At several points in past years, Treasury has taken exceptional actions to delay the date by which the limit was reached in order to give Congress additional time to raise the limit. These extraordinary actions include: suspending sales of State and Local Government Series (SLGS) Treasury securities[1]; suspending reinvestment of the Government Securities Investment Fund (G-Fund)[2]; suspending reinvestment of the Exchange Stabilization Fund (ESF)[3]; and determining that a “debt issuance suspension period” exists, permitting redemption of existing, and suspension of new, investments of the Civil Service Retirement and Disability Fund (CSRDF)[4]. Treasury would prefer not to have to engage again in any of these extraordinary measures. If we are forced to do so again, these measures could delay the date by which the limit is reached by several weeks. Once these steps have been taken, no remaining legal and prudent measures would be available to create additional headroom under the debt limit, and the United States would begin to default on its obligations.

As discussed in greater detail below, raising the debt limit is necessary to allow the Treasury to meet obligations of the United States that have been established, authorized, and appropriated by the Congress. It is important to emphasize that changing the debt limit does not alter or increase the obligations we have as a nation; it simply permits the Treasury to fund those obligations Congress has already established.

In fact, even if Congress were immediately to adopt the deep cuts in discretionary spending of the magnitude suggested by some Members of Congress, such as reverting to Fiscal Year 2008 spending levels, the need to increase the debt limit would be delayed by no more than two weeks. The limit would still need to be raised to make it possible for the government to avoid default and to meet the other obligations established by Congress.

The national debt is the total amount of money borrowed in order to fulfill the requirements imposed by past Congresses and under past presidencies, during periods when both Republicans and Democrats were in control of different branches of government. These are legal obligations, incurred under the laws of the United States. Responsibility for creating the debt is bipartisan, and responsibility for meeting the Nation’s obligations must be shared by both parties.

As the 112th Congress turns to this issue, I want to stress that President Obama believes strongly in the need to restore balance to our fiscal position, and he is committed to working with both parties to put the Nation on a fiscally responsible path. This will require difficult choices and a comprehensive approach to reduce the gap between our commitments and our resources. It will require that the government spend less and spend more wisely. The President has already taken important steps, including enacting the savings in the Affordable Care Act; restoring Pay-As-You-Go budgeting; and undertaking a three-year freeze on non-security discretionary spending. The President’s proposals would put us on a path to cut the deficit by more than half in the medium term, and substantially reduce the rate of growth in federal health care costs in the long term. The President looks forward to working with Members of the 112th Congress on additional measures to address our medium- and long-term fiscal challenges.

Because Congress has always acted to increase the debt limit when necessary, and because failure to do so would be harmful to the interests of every American, I am confident that Congress will act in a timely manner to increase the limit this year. However, for the benefit of Members of Congress and the public, I want to make clear, for the record, what the implications of a default would be so there can be no misunderstanding when the issue is debated in the House and Senate.

Reaching the debt limit would mean the Treasury would be prevented by law from borrowing in order to pay obligations the Nation is legally required to pay, an event that has no precedent in American history. Such a default should be understood as distinct from a temporary government shutdown resulting from failure to enact appropriations bills, which occurred in late 1995 and early 1996. Those government shutdowns, which were unwise and highly disruptive, did not have the same long-term negative impact on U.S. creditworthiness as a default would, because there was headroom available under the debt limit at that time.

I am certain you will agree that it is strongly in our national interest for Congress to act well before the debt limit is reached. However, if Congress were to fail to act, the specific consequences would be as follows:

• The Treasury would be forced to default on legal obligations of the United States, causing catastrophic damage to the economy, potentially much more harmful than the effects of the financial crisis of 2008 and 2009.
  
• A default would impose a substantial tax on all Americans. Because Treasuries represent the benchmark borrowing rate for all other sectors, default would raise all borrowing costs. Interest rates for state and local government, corporate and consumer borrowing, including home mortgage interest, would all rise sharply. Equity prices and home values would decline, reducing retirement savings and hurting the economic security of all Americans, leading to reductions in spending and investment, which would cause job losses and business failures on a significant scale.
  
• Default would have prolonged and far-reaching negative consequences on the safe-haven status of Treasuries and the dollar’s dominant role in the international financial system, causing further increases in interest rates and reducing the willingness of investors here and around the world to invest in the United States.
  
• Payments on a broad range of benefits and other U.S. obligations would be discontinued, limited, or adversely affected, including:
• U.S. military salaries and retirement benefits;
• Social Security and Medicare benefits;
• veterans’ benefits;
• federal civil service salaries and retirement benefits;
• individual and corporate tax refunds;
• unemployment benefits to states;
• defense vendor payments;
• interest and principal payments on Treasury bonds and other securities;
• student loan payments;
• Medicaid payments to states; and
• payments necessary to keep government facilities open.

For these reasons, any default on the legal debt obligations of the United States is unthinkable and must be avoided. It is critically important that Congress act before the debt limit is reached so that the full faith and credit of the United States is not called into question. The confidence of citizens and investors here and around the world that the United States stands fully behind its legal obligations is a unique national asset. Throughout our history, that confidence has made U.S. government bonds among the best and safest investments available and has allowed us to borrow at very low rates.

Failure to increase the debt limit in a timely manner would threaten this position and compromise America’s creditworthiness in the eyes of the world. Every Secretary of the Treasury in the modern era, regardless of party, has strongly held this view. Given the gravity of the challenges facing the U.S. and world economies, the world’s confidence in our creditworthiness is even more critical today.

I hope this information is responsive to your request and will be helpful as Congress considers this important legislation.

Timothy F. Geithner

cc: The Honorable John A. Boehner, Speaker of the House
The Honorable Nancy Pelosi, House Minority Leader
The Honorable Mitch McConnell, Senate Minority Leader
The Honorable Dave Camp, Chairman, House Committee on Ways and Means
The Honorable Sander M. Levin, Ranking Member, House Committee on Ways and Means
The Honorable Max Baucus, Chairman, Senate Committee on Finance
The Honorable Orrin Hatch, Ranking Member, Senate Committee on Finance
All other Members of 112th Congress

---

[1] SLGS are special purpose Treasury securities issued to state and local government entities that have cash proceeds to invest from their issuance of tax exempt bonds. There is no statutory or other requirement that Treasury issue SLGS, so Treasury may suspend SLGS sales during a debt limit impasse.

[2] The G-Fund is a money-market-like defined-contribution retirement fund for federal employees. Amounts in the G-Fund are invested in non-marketable Treasury securities, and the entire balance of the fund matures daily. Treasury has authority to suspend reinvestment of all or part of the balance of the G-Fund when the Secretary determines that the fund cannot be fully invested without exceeding the debt limit.

[3] The ESF is used by Treasury to purchase or sell foreign currencies. The dollar-denominated holdings of the ESF are invested in non-marketable Treasury securities, and the entire balance of the dollar-denominated investments matures daily. There is no requirement to keep the dollar balances of the ESF invested.

[4] The CSRDF is a government fund that holds and invests in nonmarketable Treasury securities to provide defined benefits to retired federal employees. Treasury has authority to redeem existing CSRDF investments and suspend new investments when the Secretary determines that the fund cannot be fully invested without exceeding the debt limit.

China & Russia Renounce U.S. Dollar in Bilateral Trade Agreements

Yikes, this is not a good sign. The world is slowly weaning itself of its dollar fix. In the past decades, many of the world's major transactions had to pass through the U.S. financial system, because of the world's usage of the dollar. Now that Russia and China are making bilateral deals with their own respective currencies, the dollar's value in the world may soon decrease.

China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.

Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.

Source: Asia One

Dominique Strauss-Kahn's Closing Remarks at IMF Conference in Shanghai on Macro-Prudential Policies to Address Global Financial Crisis

While American's worry about what Clarence Thomas allegedly did a score ago, the big boys (see: IMF and other globalists) are holding conferences in far-off lands like Shanghai, like this one that occurred earlier this week.

The International Monetary Fund on Friday said it will hold a high-level conference of central bank governors in Shanghai next week to discuss ways to address the global financial crisis.

The IMF said the conference, scheduled for Monday, would include central bank chiefs and other officials from Asia, Africa, Europe, and North and South America.

The statement and closing remarks of the Managing Director, International Monetary Fund Dominique Strauss-Kahn at the conference follows below:

###

Macro-Prudential Policies—an Asian Perspective
Closing Remarks by Dominique Strauss-Kahn, Managing Director, International Monetary Fund
Shanghai, October 18, 2010

As prepared for delivery

Good afternoon. It is a great pleasure to address this distinguished gathering, and to participate in the debate over the course of the day.

It is no accident that this conference is taking place in Asia. The ongoing transformation of the global economy, with Asia as an economic powerhouse, has been accelerated by the crisis. Today, Asia stands at the helm of the global recovery. Its policy choices are important for its own sake, and also for the global economy as a whole.

Looking ahead, fixing the fragilities in the global financial system is a key priority. This conference focuses on macro-prudential policies, which deal with the intersection of the real economy and the financial sector, providing a birds-eye view of the entire system. In our interconnected world, these policies will become increasingly important, both in shifting seamlessly out of the crisis and in moving toward new sources of growth.

Asia’s economic performance

Asia’s economic performance over the past few decades has been nothing short of remarkable. Driven by rapid and steady growth, the region now accounts for about a third of the global economy, up from under just a fifth in 1980. On current trends, Asia’s economy could be as large as the United States and the European Union—combined—by 2015.

Of course, growth must benefit everybody. And here, Asia has made tremendous progress with poverty reduction, with China alone pulling hundreds of millions of people out of poverty over the past few decades. Such a feat has never before been accomplished in the entire history of human civilization.

And when the global financial crisis hit, Asia proved remarkably resilient, bouncing back stronger and faster than elsewhere. Asia had not made the mistakes of other countries by piling up debt or using complex financial engineering that magnified risk. Banks had built sizeable capital cushions, followed prudent lending practices, and had limited exposure to toxic assets. Policymakers had internalized the lessons of the past, embracing sound macroeconomic and prudential policies.

Thanks to solid foundations and a quick and forceful policy response, Asia has become the launching pad of the global economic recovery. But this comes with challenges of its own.

The centrality of cooperation

Let me talk a little about cooperation. Cooperation is really the great legacy of this crisis, and is the main reason why the Great Recession did not become a second Great Depression.

This spirit of cooperation must be maintained. Without it, the recovery is in peril. Today, there is a risk that the single chorus that tamed the financial crisis will dissolve into a cacophony of discordant voices, as countries increasingly go it alone. This will surely make everybody worse off.

This is not a mantra. In a submission to the G20, the IMF showed exactly what could be accomplished by cooperative action on the part of the world’s major economies—boosting world growth by 2½ percentage points over five years, creating 30 million new jobs, and lifting 33 million people out of poverty. It’s a win-win outcome, and every country and region must play their part.

The great challenges of today all require a cooperative solution—especially if we are to achieve strong, sustainable, and balanced global growth in the years ahead. This is directly related to today’s conference. Future growth must be safer growth, less prone to financial excess and the buildup of macroeconomic imbalances. So financial sector and macro-prudential policies are like the glue that holds the system in place.

Financial sector reform

Let me talk a little bit about financial sector repair and reform. Before we talk about a new growth model, we need to fix old problems. We must make the financial sector safer and more stable, and put the banks back in the service of the real economy. Many of these problems emanate in the advanced countries beyond Asia, and these countries need to take the lead in fixing these problems.

We have a lot of unfinished business. Much progress has been made on the regulatory front, especially with the Basel III rules on the quantity and quality of bank capital. But these rules only apply to a subset of the financial system. Reforms must deal with risks in all financial institutions, not just banks—we learned this lesson the hard way during the crisis.

This is just regulation. There is still a lot to do on the other pillars of financial stability—supervision and crisis resolution. Rules are only as good as their implementation, and so supervision must be intensive and intrusive—not afraid of saying no to powerful interests. We also need coherent resolution mechanisms—both domestically and across borders—to allow failing firms to be wound down with minimal cost to taxpayers and to end the scourge of too-big or too-important to fail. Here, the IMF has proposed a financial stability contribution linked to a credible and effective resolution mechanism to pay for future bailouts. The cross-border issue is especially important, but vested interests remain strong. We have proposed a pragmatic cross-border coordination framework—this must be made operational among a small set of countries that are home to most cross-border institutions.

The macro-prudential angle

And then there is the macro-prudential dimension, the topic of the day. We all know that systemic risk is paramount. Looking to the safety and soundness of individual institutions is important, but we must not miss the big picture—how everything comes together to affect the stability and resilience of the financial system in its totality.

Amidst the rubble from the crisis, we need to build up a new macro-prudential framework. It is appropriate that this discussion takes place in Asia. Asia is leading the global recovery and is moving swiftly back toward normal policy conditions. Capital flows are flooding in. We do not want history to repeat itself in such a short time span. Asia also has a unique opportunity to lead by example.

Capital flows present a great opportunity for Asia, but also a great challenge. On one hand, we want capital to flow toward emerging markets. Channeled in the right direction—and guided by deepening domestic capital markets and effective supervision—capital flows can boost investment, growth, and living standards. But on the other hand, some flows can clearly be destabilizing. They can lead to exchange rate overshooting, credit booms, asset price bubbles, and financial instability.
So how should countries address these kinds of vulnerabilities? Since capital flows can reverse quickly in times of panic, it makes sense to have a financial safety net to complement macro-prudential policies. Regional financing arrangements—such as the Chiang Mai initiative—can play an important role here. The IMF is working to strengthen the global financial safety net, and stands ready to work with regional partners.

Dealing with crises is important, but it’s even better to prevent them. How can countries do this? I would first note that this is a pragmatic issue, not a matter of ideology. Countries have a number of policy options in their toolkits—lower interest rates, reserves accumulation, tighter fiscal policy, macro-prudential measures, and sometimes capital controls. The response should depend on circumstances—there is no one-size-fits-all solution. For example, with a credit-fueled housing bubble, prudential tools might be the way to go. If instead the problem is debt inflows fueling a boom in foreign currency lending to unhedged borrowers, then the solution might be different and might include capital controls. Again, we should always be pragmatic.

Clearly, conventional macroeconomic policies and macro-prudential tools are intrinsically linked, just as price stability and financial stability are intrinsically linked. We need a holistic approach, which means a changing role for central banks in the years ahead.

Conclusion

Let me try to sum up. This is a complex policy agenda, and will simply not succeed without cooperation. Without cooperation, the recovery is under threat and financial sector reform could be doomed to fail.

In all of this, the world is looking to Asia to play its part. Your time has come. Just as the 19th century belonged to Europe, and the United States dominated the 20th century, the 21st century can be the Asian century.

But with that comes great responsibility—to lead, to guide, and to take ownership of the collaborative agenda. Asia is now a major economic region, and being at the center means being responsible for the whole. Asia has an important voice in world affairs through the G20, and also through the IMF, which is in the process of giving more influence to dynamic emerging markets.

I will finish by saying that the IMF fully supports this agenda. The last time I was in Asia, in Korea, I said that the IMF can be an effective partner for Asia, and indeed, its second home. How can we do this? First, by better monitoring economic and financial risks, including with mandatory FSAPs for systemic countries, our early warning exercise, and our analysis of country spillovers. Second, by continuing to strengthen our crisis prevention and management frameworks, reducing the incentive to self-insure and supporting a global rebalancing. And third, by providing a forum for international policy cooperation, where 187 different countries are wedded a single goal—a prosperous world with rising living standards for all. Remember, we are all in this together.

Thank you very much.

IMF EXTERNAL RELATIONS DEPARTMENT
Public Affairs Media Relations
Phone: 202-623-7300 Phone: 202-623-7100
Fax: 202-623-6278 Fax: 202-623-6772

Former Fed Chairman Alan Greenspan Says the Financial System Is Broken

Visit msnbc.com for breaking news, world news, and news about the economy

Remember, this is the guy who ran the Federal Reserve from 1987 until 2006. Many people actually blame Greenspan's policies for breaking the American financial system. Nevertheless, it is surprising to hear Mr. Greenspan make such a statement.

At the moment there is no sign of that because the financial system is broke and you can not have inflation if the financial system is not working."

Source: Zero Hedge

Trucking Industry Says U.S. Economy is Slowing as For-Hire Truck Tonnage Index Decreased 1.4% in June, 2010

The truckers deliver America's goods, so their opinion on the slowing economy is telling. In fact, I believe the truckers before I believe the politicians.

ATA Chief Economist Bob Costello said that the two sequential decreases reflect a slowing economy and growth in truck tonnage is likely to moderate in the months ahead as the economy decelerates. However, Costello believes that tonnage doesn’t have to grow very quickly at this point since industry capacity has declined so much. “Due to supply tightness in the market, any tonnage growth feels significantly better for fleets than one might expect,” he said.

Source: American Trucking Associations

FLASHBACK: TARP Special Inspector Barofsky Says U.S. Taxpayer Bailout May Cost $23.7 Trillion!

Barofsky Testimony

U.S. taxpayers may be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, said Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program.

The Treasury’s $700 billion bank-investment program represents a fraction of all federal support to resuscitate the U.S. financial system, including $6.8 trillion in aid offered by the Federal Reserve, Barofsky said in a report released today.

Source: Bloomberg

Goldman Sachs Jim O'Neill Says Watch China & United States "Like a Hawk"

This article is part 2 to an earlier article I wrote a few days ago called Goldman Sachs Chief Economist Warns That China's Economic Troubles Could Lead to Another Global Slowdown. While the earlier Part 1 article paraphrased Mr. O'Neill's words, the below quotes are taken directly from Mr. O'Neill's recent opinion piece in The Sunday Telegraph called "Watch China and US 'like a hawk."

Watching how China handles this attempt at slowing the momentum of current growth without killing the shift to domestic demand is therefore absolutely critical. It is true whether you are from BMW, Audi or Mercedes or for those at top universities or private schools. I was recently in Munich meeting with their largest well known companies, and I left there thinking what is going on in China is more important for that city than anything that is going on in the rest of Europe. If China manages this slowing poorly, then it will be more dangerous for the Germans than any of Greece's financial troubles. Similarly for many of Britain's elite education establishments, if China screws up it would make dilemmas raised from the fiscally austere Coalition seem a minor distraction.

Source: The Sunday Telegraph

MSNBC's Dylan Ratigan Admits U.S. Stock Market is Corrupt

It is shocking to hear such an admission on the mainstream media.

Goldman Sachs Chief Economist Warns That China's Economic Troubles Could Lead to Another Global Slowdown

I don't like Goldman Sachs, because the company seems to be the funding engine for every organization or event that I write against on this blog. Goldman sold more than 40% of its BP shares weeks before the Deepwater Horizon disaster. Goldman executives hold key positions in President Obama's White House, including the Secretary of the Treasury. Nevertheless, because the company has so much influence and control in the government and financial markets, when the company makes a public statement, it must be taken seriously.

Therefore, I am posting this article where Goldman Sachs' chief economist raises the fears for another worldwide economic slowdown.

Writing in The Sunday Telegraph, Mr O'Neill, head of global economic research at Goldman, said: "What is clear is that a persistently struggling US, in addition to a major disappointment in China, would not be good news for the rest of us."

"What adds to the reality of this situation is that there appears to be growing evidence that China is slowing down."

See also: Goldman Sachs Jim O'Neill Says Watch China & United States "Like a Hawk"

Source: London Telegraph

Federal Reserve Bank of New York Launches Propaganda Comic Book Called "The Story of Inflation"

Comic Inflation[1]

Why is the Federal Reserve Bank of New York suddenly in the comic book business? You can order the book from the Federal Reserve or read the document in the embedded link above.

The FRBNY has published a comic book, full of the misadventures of the infamous Darth Inflation. With such zingers as "By discouraging saving, inflation can harm the US economy. That's because the economy needs a supply of savings to provide the funds for people and business to borrow so that they can invest in the things that help the US economy grow" it is now clear that the entire FRBNY Board is comprised of lunatics, as apparently these people have not heard of ZIRP, QE, 0% interest on money markets and savings accounts, and must have Apple gizmos.

Source: Zero Hedge ; New York Federal Reserve

TARP Oversight Chairperson Elizabeth Warren Says Half of All Commercial Real Estate Mortgages Will Underwater by End of 2010

I find Elizabeth Warren more credible than anyone else in President Obama's administration, so I believe her when she says that half of all commercial real estate mortgages will be underwater by the end of 2010. What happens to our economy if Ms. Warren is accurate? I am personally seeing a lot more empty commercial real estate in my neighborhood these days.

“They are [mostly] concentrated in the mid-sized banks,” Warren told CNBC. “We now have 2,988 banks—mostly midsized, that have these dangerous concentrations in commercial real estate lending."

As a result, the economy will face another “very serious problem” that will have to be resolved over the next three years, she said, adding that things are unlikely to return to normalcy in 2010.

You can watch Ms. Warren's full interview with CNBC by clicking this link.

Source: CNBC ; Plus a big fat thanks to Stazel One who provided this news tip.

The Decline: Geography of a Recession by LaToya Egwuekwe (Official Unemployment Map)