1/29/08 News Radar

Jan. 29 (Bloomberg) -- The U.S. will inject $1 billion of new capital into corporate credit unions and back the lenders’ assets amid “unprecedented strains” from mounting losses in a bid to shore up public confidence, a federal regulator said.

The U.S. Central Corporate Federal Credit Union will get a $1 billion federal injection that will boost “the public’s confidence” in credit unions, the lender said.
http://www.bloomberg.com/apps/news?pid=20601208&sid=aoEv8mwPj5AA&refer=finance

Hundreds of thousands of French workers held a one-day national strike on Thursday in a protest at job cuts, temporary lay-offs, the government’s economic and welfare reforms and the lack of fiscal stimulus measures aimed directly at helping households.

Union leaders said 200 demonstrations across France amounted to the biggest protest by employees for 20 years. But the strike caused less disruption to public transport, public services and businesses than anticipated. Schools, however, were badly affected with half of teachers not turning up for work. Traffic was unusually quiet on the streets of Paris with many workers choosing to stay at home.
http://www.ft.com/cms/s/0/369978fc-ed5c-11dd-88f3-0000779fd2ac.html?nclick_check=1

Jan. 29 (Bloomberg) -- Indian exporters have shed as many as 1 million jobs, more than 15 times a December estimate, amid the most protracted decline in overseas sales in a decade, the commerce ministry said.

“The job losses are very substantial and are likely to be of the order of 700,000 to 1 million, including temporary staff,” Commerce Secretary G.K. Pillai told Bloomberg News in an interview in New Delhi yesterday. Exports fell 1 percent in December and any recovery “is likely only by June,” he said.
http://www.bloomberg.com/apps/news?pid=20601013&sid=anyinXhfS6fA&refer=emergingmarkets

Hate to bust their hopes but next June is very optimistic!

DAVOS, Switzerland — The leaders of the former bastions of the Communist bloc took the stage here on Wednesday to rebuke their capitalist brothers for dragging the world into crisis but also to assure them that, working together, they can rapidly restore the global economy to health.

In the official opening address of the World Economic Forum, Prime Minister Vladimir V. Putin of Russia spoke of a financial “perfect storm” that has decimated the old system, rendering it obsolete.

“A year ago, American delegates speaking from this rostrum emphasized the U.S. economy’s fundamental stability and its cloudless prospects,” he said, speaking through a translator. “Today, investment banks, the pride of Wall Street, have virtually ceased to exist.”

But the damage goes beyond Wall Street, he said. “The entire economic growth system, where one regional center prints money without respite and consumes material wealth, while another regional center manufactures inexpensive goods and saves money printed by other governments, has suffered a major setback.”

The Chinese premier, Wen Jiabao, left little doubt that Beijing blamed the United States for the economic breakdown. “Inappropriate macroeconomic policies,” an “unsustainable model of development characterized by prolonged low savings and high consumption,” the “blind pursuit of profit” and “the failure of financial supervision” all contributed, he said.
http://www.nytimes.com/2009/01/29/world/europe/29davos.html?_r=1&ref=business

Yeah China and Russia are such perfect models....not! If it wasn't for oil Russia would still be begging for IMF loans to feed its people. The same could be said for China concerning currency manipulation.

The bursting of bubbles causes credit contraction, the forced liquidation of assets, deflation and wealth destruction that may reach catastrophic proportions. In a deflationary environment, the weight of accumulated debt can sink the banking system and push the economy into depression. That is what needs to be prevented at all costs.

It can be done – by creating money to offset the contraction of credit, recapitalising the banking system and writing off or down the accumulated debt in an orderly manner. They require radical and unorthodox policy measures. For best results, the three processes should be combined.

If these measures were successful and credit started to expand, deflationary pressures would be replaced by the spectre of inflation and the authorities would have to drain the excess money supply from the economy almost as fast as they had pumped it in. There is no way to escape from a far-from-equilibrium situation – global deflation and depression – except by first inducing its opposite and then reducing it.

To prevent the US economy from sliding into a depression, Mr Obama must implement a radical and comprehensive set of policies. Alongside the well-advanced fiscal stimulus package, these should include a system-wide and compulsory recapitalisation of the banking system and a thorough overhaul of the mortgage system – reducing the cost of mortgages and foreclosures.

Energy policy could also play an important role in counteracting both depression and deflation. The American consumer can no longer act as the motor of the global economy. Alternative energy and developments that produce energy savings could serve as a new motor, but only if the price of conventional fuels is kept high enough to justify investing in those activities. That would involve putting a floor under the price of fossil fuels by imposing a price on carbon emissions and import duties on oil to keep the domestic price above, say, $70 per barrel.

Finally, the international financial system must be reformed. Far from providing a level playing field, the current system favours the countries in control of the international financial institutions, notably the US, to the detriment of nations at the periphery. The periphery countries have been subject to the market discipline dictated by the Washington consensus but the US was exempt from it.

How unfair the system is has been revealed by a crisis that originated in the US yet is doing more damage to the periphery. Assistance is needed to protect the financial systems of periphery countries, including trade finance, something that will require large contingency funds available at little notice for brief periods of time. Periphery governments will also need long-term financing to enable them to engage in counter-cyclical fiscal policies.

In addition, banking regulations need to be internationally co-ordinated. Market regulations should be global as well. National governments also need to co-ordinate their macroeconomic policies in order to avoid wide currency swings and other disruption.

This is a condensed, almost shorthand account of what needs to be done to turn the global economy around. It should give a sense of how difficult a task it is.
http://www.ft.com/cms/s/0/49b1654a-ed60-11dd-bd60-0000779fd2ac.html

This is the George Soros solution to our problems. Key words in last paragraph - "internationally co-ordinated, global market regulations, co-ordinate national governments". Globalist. Yep, that's the solution - make us all one big happy family...under his control of course!

Jan. 29 (Bloomberg) -- The world is facing an “enormous” challenge to feed a growing population because climate change is altering rainfall patterns and fresh water is becoming scarcer, the U.K. government’s top scientist said.

Governments need to boost spending on agricultural research and reconsider options such as genetically-modified foods, which have been historically rejected by consumers in Europe, John Beddington told the Environment, Food and Rural Affairs Committee.

“We have at the global level a genuine issue of world food shortage,” Beddington told lawmakers. “Can you feed 9 billion people by 2050 in some form of equitable and sustainable way?”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aoKSTKyrvcjI

Notice that they used the words "climate change" rather than global warning. Dingle berries(aka Al Gore) is giving a speech about global warming in DC today...as it snows! ROFLMAO

The economy will recover. It won’t recover anytime soon. It is likely to get significantly worse over the course of 2009, no matter what President Obama and Congress do.
http://www.nytimes.com/2009/02/01/magazine/01Economy-t.html?ref=business

More idiocracy from the Times...opens with a statement like that and then goes on to state how the government ought to address the future and create high growth.

Jan. 29 (Bloomberg) -- Ford Motor Co., insisting it can survive without federal loans, said it burned $5.5 billion in cash in the fourth quarter and will tap a revolving credit line after the worst annual performance in its 105-year history.

The credit line will give Ford access to $10.1 billion in cash this quarter. Ford also said the United Auto Workers union had agreed to end the so-called jobs bank, in which employees are paid even when there is no work, following similar steps for GM and Chrysler. Ford has about 1,500 workers in the program.

Ford’s quarterly revenue plunged 34 percent to $29.2 billion as the recession dragged down the company’s U.S. vehicle sales by 30 percent, hastening the cash drain. Total liquidity at year’s end was $24 billion, Ford said.

The company has managed to forgo the federal loans doled out to GM and Chrysler because Chief Executive Officer Alan Mulally decided to borrow $23 billion in 2006, securitizing all of Ford’s assets, including its trademark blue oval logo.

Still, Ford’s cash burn in the past two quarters totals $13.2 billion. The company reported having $18.9 billion on Sept. 30. Ford won’t specify its minimum cash needs to stay in business.

GM, the largest U.S. automaker, has said it needs at least $11 billion in cash on hand to pay bills, while No. 3 Chrysler has put its threshold at $2 billion to $2.5 billion. Both said they would have been out of operating funds as soon as this month without the emergency aid they received in December.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aRwX199MH0SU&refer=us

This should be called - "Tucker's Revenge". The sooner these old rotten dinosaurs disintegrate the better off we will be! When a 2008 model only gets 1 mpg better than the 1988 version you know either the engineers are completely ignorant...or their hands are tied!

The world economy will this year suffer its worst performance for more than 60 years with a serious risk that 50m people will lose their jobs, international organisations warned on Wednesday.

The warnings came as the Federal Reserve expressed fresh concern about deflation, noting that the US economy had “weakened further” since its last policy meeting in December.

The US central bank made no immediate move to purchase Treasury securities – disappointing some in the markets – and signalled that its preference is to expand targeted credit operations instead. The Fed said it would “assess whether expansions of or modifications to lending facilities would serve to further support credit markets”.
http://www.ft.com/cms/s/0/4b1f235e-ed6f-11dd-bd60-0000779fd2ac.html

Deflation is good for those who have "real" money (i.e. not credit). They buy up all the assets for a song and a dance...well maybe just a song this time around. Then they pump credit back into the system and pump the prices back up. Sell everything off. Wash, rinse, repeat cycle!

Jan. 29 (Bloomberg) -- Federal Reserve officials warned of a prolonged global economic slowdown that may push the U.S. to the brink of deflation.

For the first time during the credit crisis, the Federal Open Market Committee’s statement yesterday indicated concern about the worldwide economy weakening “significantly,” with “some risk” that inflation would remain below ideal rates. The Fed signaled it’s moving closer to buying long-term Treasuries and expanding its $600 billion program to buy home-finance debt.

Chairman Ben S. Bernanke and his colleagues are focused on reducing a range of long-term borrowing costs to stem the longest recession since 1982. Policy makers, concluding a two-day meeting yesterday, left their target range for the main interest rate unchanged at close to zero and reiterated rates will be “exceptionally low” for “some time.”

“It’s just clear that the Fed is hoping to keep those long- term interest rates coming in a downward trend,” David M. Jones, president of DMJ Advisors LLC in Denver and a former Fed economist, said in an interview with Bloomberg Radio. “That’s the only way they can give aggregate demand a boost and help this economy at least start to get out of recession.”
http://www.bloomberg.com/apps/news?pid=20601103&sid=a4KPs.0wymUo&refer=us

Um yeah that method is highly successful...shoot Japan went...what...like close to 10 years with zero percent rates and look how successful they were?

Israeli air raids struck a Hamas target in Khan Younes, inflicting at least 10 Palestinian casualties Thursday, Jan. 29, after two missiles aimed at Sderot from Gaza early that morning landed in the Shear Hanegev region.

The first pair was fired Wednesday. Overnight, the Israeli Air force struck a missile workshop in the southern Gaza town of Rafah. DEBKAfile's military circles report that in the 48 hours since a roadside bomb from Gaza killed an Israeli soldier and injured three, Hamas has reverted to its tit-for-tat cycle in an effort to demonstrate who makes the rules.

Earlier, we reported that the approach of a fresh Gaza flare-up caused defense minister Ehud Barak to cancel his trip this week to Washington for talks with US defense secretary Robert Gates. Wednesday, as Barack Obama's Middle East envoy George Mitchell met with Israeli leaders in Jerusalem, Hamas fired its first two Qassam missiles and several mortar rounds into southern Israel since the 22-day conflict was halted by ceasefires. In Damascus, meanwhile Hamas and other radical Palestinian leaders rejected Cairo's plan for a long-term truce, demanding the reopening of all the Gaza crossings first.

This rejection was backed by the fresh round of missiles and mortar shells from Gaza.

Hamas was signaling its intention to revert to pummeling southern Israel again with rockets and missiles if its armed forces resorted to major retaliation for the fatal roadside bomb.

Until Hamas-Damascus slapped down its veto, Egypt had hoped for a long-term truce to begin on Feb. 5, followed by a power-sharing conference between the warring Palestinian factions on Feb. 22. The timeline was announced by Egyptian foreign minister Aboul Gheit.

But Hamas' rejection has taken Cairo back to square one. The Egyptians believe that a good military hiding by Israel will bring the Palestinian Islamist extremists back to the negotiation table in a more reasonable frame of mind. This situation prompted Barak's remark that another Hamas attack or two is to be expected soon.

Israeli and Egyptian leaders updated Mitchell Wednesday and explained why the ceasefire which he sought to consolidate during his Middle East tour had become untenable. Cairo and Jerusalem were equally resigned to another round of hostilities before diplomacy could take off.

Our military sources stress that the Israeli air strike which killed a Hamas member of the bomb squad in Khan Younis Tuesday night and its bombardment of three Philadelphi Corridor smuggling tunnels early Wednesday were but a foretaste of the reprisals the Israel military has in store for curbing further Hamas aggression.
http://www.debka.com/headline.php?hid=5879

So much for the cease fire.

NEW YORK – A call to utilize the current global economic crisis as a panic in which governments worldwide can move to nationalize banks is emerging from the 2009 World Economic Forum in Davos, Switzerland.

The forum's founder, Klaus Schwab, told CNN yesterday the current global economic slowdown is a "transformational crisis" that should be utilized to shape a "new world."

"Above all else this is a crisis of confidence," Schwab said. "To restore confidence you have to establish signposts that the world after the crisis will be different. We have to create a new world and that is what Davos 2009 will be all about – serving society."

Roubini called on the Obama administration to employ the "Swedish solution," in which the U.S. government would nationalize troubled banks, not just investing bailout cash but also taking over and giving management control to U.S. government bureaucrats.

Stiglitz reasoned economic incentives dictated that private bank managers – if left in place after injecting TARP funds without government control – would "have incentives to pay themselves bonuses, to pay shareholders dividends and to use bailout funds to make acquisitions."

"We need to run these banks for our interest," Stiglitz said, arguing the Obama administration should move to nationalize banks.

"The government could not do worse than the banks themselves have done," he observed, insisting TARP bailouts made no sense unless the government ended up controlling the banks.
http://worldnetdaily.com/index.php?fa=PAGE.view&pageId=87405

By all means yes let's shape a whole new world because it is a crisis of confidence. Guess what though its confidence in honesty and integrity - both from business and government leaders. I don't see anything being done to address that!

Another magnificent fallacy - "giving management control to U.S. government bureaucrats". This is the height of ignorance. Since when has a government bureaucrat been a good banker? The government is How Deep in Debt? Been running Deficits for How Long? Hello - Wake up and smell the roses! Or in this case turds!

Here's some news today about how well our government bureaucrat's do with what they have been entrusted with...after reading make your own decision on whether they should be entrusted with the banking system.

Jan. 29 (Bloomberg) -- U.S. Senator Kit Bond shifted in his chair at a 2005 congressional hearing, poised with a question on national security. He turned to Treasury Secretary John Snow, who was seated at a witness table.

Was Snow sure, asked Bond, a Missouri Republican, that a Treasury Department computer on order for $8.9 million would help detect terrorist money laundering?

“Yes, absolutely,” Snow said.

A year later, in July 2006, the U.S. Treasury Department abandoned the project. The computer didn’t work. The department had spent $14.7 million -- a 65 percent increase above the original budget -- for nothing.

There was a final ignominy: Under the terms of the contract, Electronic Data Systems Corp., the vendor, collected a bonus of $638,126.

As the federal government’s $700 billion bailout of banks sputters, there’s an object lesson for the new administration of President Barack Obama: Federal departments, including Treasury itself, routinely squander tens of billions of dollars a year in taxpayer money as they farm out public business to private corporations.

When compared with all federal contracting, just a fraction of U.S. spending waste comes from so-called earmarks, which elected officials often criticize as the unnecessary pet projects of politicians.

The “Bridge to Nowhere” in Alaska, for example, had a price tag of $398 million. By contrast, the government spent $368.4 billion on all contracts in 2008, and Republican Oklahoma Senator Tom Coburn estimates that about $100 billion of that was wasted.

U.S. spending on 3.7 million contracts in 2008 represented an increase of 76 percent over 2000 levels.

“We have a broken, broken system that rewards incompetence,” says Coburn, 60.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aYYHKPn4DOe8&refer=exclusive

Abed Rabbo said he gathered his wife, their three daughters and his mother, Souad. Souad Abed Rabbo said that she tied a white robe around a mop handle and two of her granddaughters waved white headscarves as they walked outside.

When they opened the door, they saw an Israeli tank parked in their garden about 10 yards away.

"We were waiting for them to give us an order," Khaled said last week as he stood in the ruins of his home. "Then one came out of the tank and started to shoot."

Souad Abed Rabbo said she was shot as she pushed her son back inside and her granddaughters fell on the stairs. When the shooting was over, she said, 2-year-old Amal and 7-year-old Souad were dead.

The allegation is one of at least five such white flag incidents that human rights investigators are looking into across the Gaza Strip. It's part of a growing pattern of alleged abuses that have raised concerns that some Israeli soldiers may have committed war crimes during their 22-day military campaign in Gaza.

"The evidence we've gathered in two of the cases so far is exceedingly strong," said Fred Abrahams, a senior researcher with Human Rights Watch working in the Gaza Strip. "All the research so far suggests they shot civilians that were leaving their homes with white flags."
http://www.mcclatchydc.com/226/story/60853.html

(IsraelNN.com) Italian journalist Lorenzo Cremonesi, who works with the Corriere della serra newspaper, reported Thursday that Hamas had vastly overstated the number of civilian deaths in Gaza. While Hamas claims that 1,330 residents of Gaza were killed in the operation and approximately 5,000 wounded, the real number of casualties was far lower, Cremonesi says.

Cremonesi's report was based on his own findings after touring hospitals in Gaza and talking to families of those killed or wounded. “It is sufficient to visit several [Gaza] hospitals to understand that the numbers don't add up,” he explained.

Cremonesi estimated that between 500 to 600 people were killed in the fighting. Most were young men between the ages of 17 and 23 who were members of Hamas, he said.
http://www.israelnationalnews.com/News/News.aspx/129569

WASHINGTON (AP) — The Supreme Court ruled Monday that police officers have leeway to frisk a passenger in a car stopped for a traffic violation even if nothing indicates the passenger has committed a crime or is about to do so.
http://www.google.com/hostednews/ap/article/ALeqM5i0f9zHVHrRQMg0ssuar_7KsJsy9wD95UTGSG1

Jan. 29 (Bloomberg) -- The U.S. Treasury agreed to commit as much as $60 billion to shore up the market for student loans and help reduce the illiquid assets clogging banks’ balance sheets, according to three people familiar with the matter.

The department will use its Federal Financing Bank to provide a backstop for an initiative put together by Citigroup Inc. and Morgan Stanley, the people said. The so-called conduit will purchase existing and new student loans from banks, and issue asset-backed commercial paper to finance itself.

The program, which is outside of the $700 billion financial-rescue fund and doesn’t need new congressional action, comes as officials and lawmakers seek to broaden the government’s help beyond bailouts for Wall Street. Premiums on bonds backed by student loans more than tripled in the past year amid an exodus of investors from all but the safest assets.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aTirMHvhiujY&refer=worldwide

Jan. 29 (Bloomberg) -- The U.S. House passed President Barack Obama’s $819 billion stimulus package without any Republican votes as lawmakers remained divided over whether the plan would do enough to pull the economy out of recession.

The 244 to 188 vote yesterday sends the measure to the Senate, where Republicans will have more power to demand changes. They are calling for more tax cuts, less spending and a bigger focus on housing in the measure. The chamber is likely to begin work on the plan on Feb. 2. The stimulus measure is separate from the administration’s plan to shore up the banking system, which may cost in excess of $1 trillion.
http://www.bloomberg.com/apps/news?pid=20601087&sid=abMCMQN27R5w&refer=worldwide

Jan. 29 (Bloomberg) -- The number of Americans receiving unemployment benefits soared to a record, as companies slash jobs to lower costs in a deepening recession.

Continuing claims for benefits rose to 4.776 million in the week ended Jan. 17, the highest since record-keeping started in 1967, the Labor Department said today in Washington. First-time filings increased 3,000 to 588,000 in the week ended Jan. 24.
http://www.bloomberg.com/apps/news?pid=20601068&sid=aqc_bpAZTgqE&refer=economy

Eighty-one people have been detained and nearly 6,000 questioned in the past 11 days, Chinese state media reported.

The Tibetan Daily said the campaign in Lhasa was targeting criminals.

But the leaders-in-exile say they are concerned that China's "hardline policies" may lead to a repeat of last year's deadly anti-Chinese riots.

The centre of Lhasa has been under heavy security since last March, after peaceful protests turned violent following a military crackdown.

China said at least 18 people were killed during the unrest. Independent rights groups say about 200 people were killed and at least 1,000 are still missing.

Tibet independence campaigners say China's anti-crime operation appears to be aimed at intimidating Tibetans two months ahead of the 50th anniversary of the failed uprising against Chinese rule, which led to the Dalai Lama's flight into exile.
http://news.bbc.co.uk/2/hi/asia-pacific/7857896.stm

On Sunday, it was revealed that two men released from the U.S. terrorist detention center at Guantanamo Bay in 2007 had reemerged as top-level al Qaeda operatives. Three days later, other former Guantanamo prisoners were arrested. Is closing Guantanamo really such a good idea?

Appearing on a jihadist website, terrorist Abu Sufyan al-Azdi al-Shahri taunted the U.S. Identifying himself by his Guantanamo number, 372, he said: “By Allah, imprisonment only increased our persistence in our principles for which we went out, did jihad for, and were imprisoned for.”

Al-Shahri is now considered the number-two al Qaeda man in Yemen. Shown in a video seated next to al-Shahri is prisoner 333, also known as Abu al-Hareth Muhammad al-Oufi, who is now a ranking al Qaeda field commander.

Then on Tuesday, more bad news emerged. Saudi Arabia announced that it had rearrested nine Islamist terrorists, including at least two former Guantanamo inmates.

These latest Guantanamo catch-and-release resurfacings couldn’t have come at much worse of a time for President Barack Obama, who recently issued an executive order to close the Guantanamo facility and is looking for a home for the remaining 245 terrorists.
http://www.thetrumpet.com/index.php?q=5888.4255.0.0

President Obama yesterday eliminated the most controversial tools employed by his predecessor against terrorism suspects. With the stroke of his pen, he effectively declared an end to the "war on terror," as President George W. Bush had defined it, signaling to the world that the reach of the U.S. government in battling its enemies will not be limitless.

While Obama says he has no plans to diminish counterterrorism operations abroad, the notion that a president can circumvent long-standing U.S. laws simply by declaring war was halted by executive order in the Oval Office.

During his campaign and again in his inaugural address Tuesday, Obama used a different lexicon to describe operations to defeat terrorists. "As for our common defense, we reject as false the choice between our safety and our ideals," he said. ". . . And for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that our spirit is stronger and cannot be broken; you cannot outlast us, and we will defeat you."
http://www.washingtonpost.com/wp-dyn/content/article/2009/01/22/AR2009012203929.html?wprss=rss_politics

Listen to the actual verbage. This whole left vs right thing is such a facade. Quotes: "no plans to diminish counterterrorism operations abroad", "for those who seek to advance their aims by inducing terror and slaughtering innocents...we will defeat you". Doesn't really sound like the "war on terror" is over does it?

Islamic terrorists are not the only ones with a liking for decapitation. In the Mexican town of Praxedis last week, police commander Martin Castro’s severed head appeared in front of the local police station, left in an ice cooler.

A calling card from the Sinoloa drug cartel accompanied the bloodied gift.

Beheading is a tool worn with use in the macabre profession of Mexican drug cartels. Last month, eight soldiers and a state police officer were found beheaded in the state of Guerero. Along with the corpses was the message, “For every one of us you kill, we’ll kill 10 of you.” And if you think that’s sadistic, consider the former occupation of Santiago Meza Lopez. Last week, Lopez admitted to helping a drug cartel dispose of more than 300 bodies by dissolving them in sodium hydroxide.

“According to Mexico’s attorney general, 6,616 people died in drug-trafficking violence last year,” the Wall Street Journal reported this week. That’s in one year. “A high percentage of those killed were themselves criminal, but many law enforcement agents battling organized crime were also murdered. The carnage continues. For the first 22 days of this year the body count is 354″ (emphasis mine throughout). The number of deaths in 2008 was double the figure for 2007.

This trend is indicative of a major crisis. Mexico is coming unhinged.

Drug cartels have stepped up their war against the Mexican government since December 2006, when President Felipe Calderón was elected and began a campaign to destroy organized crime. As soon as Calderón began confronting the cartels, observed the Journal, it became “apparent that the cartels would stop at nothing to preserve their operations, and that a state commitment to confrontation meant that violence would escalate.”

Escalate it did. Emboldened by billion-dollar bank accounts, vast recruitment pools of countless unemployed, desperate Mexicans, friendship with international crime organizations, support from major-league weapons suppliers, and, above all, an insatiable American demand for their supply, Mexico’s drug cartels in recent years have transformed into well-equipped, well-organized, technologically advanced, highly mobile, powerful armies!

Retired U.S. Army general and former drug czar Barry McCaffrey, who recently visited Mexico, assessed the struggle between the government and the drug kingdoms thus:

"The outgunned Mexican law enforcement authorities face armed criminal attacks from platoon-sized units employing night vision goggles, electronic intercept collection, encrypted communications, fairly sophisticated information operations, seagoing submersibles, helicopters and modern transport aviation, automatic weapons, rpgs, Anti-Tank 66mm rockets, mines and booby traps, heavy machine guns, 50-cal sniper rifles, massive use of military hand grenades, and the most modern models of 40mm grenade machine guns."

These illegal drug cartels are better-financed, better-equipped and better-organized than some national armies!

There’s a term for a state that is incapable of enforcing law. It’s a failed state!

And that is what many are saying Mexico is on the road to becoming. In America, the U.S. Department of Homeland Security, the Department of Justice and the National Security Council have all, in one way or another, recently expressed alarm that Mexico could collapse under the strain of drug cartel violence.

In its “2009 National Drug Threat Assessment,” released on December 15, the U.S. Department of Justice stated that Mexican drug traffickers “represent the greatest organized crime threat to the United States.” With that statement, said Stratfor, “the Justice Department is acknowledging that Mexican drug cartels are the number-one criminal enemy of the U.S. government—a position held in the past by Irish, Italian, Russian and Colombian criminal enterprises”—a reality that has been extant for some time (Dec. 17, 2008).

The U.S. Joint Forces Command released a similar warning recently. “In terms of worst-case scenarios for the Joint Force and indeed the world,” warned the command’s “Joint Operating Environment (joe 2008)” report, “two large and important states bear consideration for a rapid and sudden collapse: Pakistan and Mexico. … In particular, the growing assault by the drug cartels and their thugs on the Mexican government over the past several years reminds one that an unstable Mexico could represent a homeland security problem of immense proportions to the United States.”

Pause for a moment and think about that: American military officials believe Mexico is at risk of a “rapid and sudden collapse” in the same way that Pakistan is!

That may sound preposterous to some. But it’s not so hard to believe if you consider that other major crises are converging on Mexico in addition to the chaos being caused by the rapidly deteriorating security situation.

First, Mexico’s economy, which is tied closely to the American economy, is being hit hard by the global economic crisis. Economic growth is slowing, the peso appears unstable and has devalued by about 20 percent since the beginning of 2008, less cash is flowing from America into Mexico, and, perhaps most dangerously, unemployment is rising, which ultimately leads to a disgruntled, restless society. In addition to those economic woes, oil revenues, which comprise 40 percent of the federal budget, will soon begin to plummet.

In short, the Mexican economy verges on collapse!

Second, Mexico’s political landscape is shifting and steadily growing more unstable. “Mexico has seen a massive spike in crime and drug-related violence coincide with the first eight years of rule by Calderón’s National Action Party (pan),” Stratfor reported. “To make things worse, the global financial crisis has begun to impact Mexico … and the impact on employment could be devastating. Given the confluence of events, it is almost guaranteed that Calderón and the pan will suffer political losses going forward, weakening the party’s ability to move forward with decisive action” (Dec. 9, 2008).

Stratfor concluded its analysis with a warning similar to the one issued by the American government:

Mexico’s most critical challenge is the convergence of events it now faces. The downturn in the economy, the political dynamics or the deteriorating security situation, each on its own, might not pose an insurmountable problem for Mexico. What could prove insurmountable is the confluence of all three, which now appears to be in the making.

Perhaps it’s difficult for Americans to replace the images of Mexico’s white, sandy beaches, deluxe hotels and bright, cheap tropical fruit with images of a failed state.

Try this.

Think about Pakistan. Nestled between the Middle East and Asia, it can be much easier to consider Pakistan in those terms. Its economy is tanking and unemployment is growing. Infrastructure is crumbling, and social unrest and dissatisfaction are seething. Handicapped by political gridlock, Pakistan’s central government is weak and ineffective. It has lost control over large swaths of territory, and is now unable to make major decisions, enact legislation and implement a united foreign policy. In short, the nation cannot set itself back on the path to success.

Worse still, Pakistan’s government has been deeply infiltrated by radical Islamists who wield significant influence over the nation’s military and intelligence departments. Entire regions of Pakistan are now controlled by radical Islamic groups, which, blinded by their religious aspirations, have little desire to ensure people are fed, create jobs, stimulate an economy or guarantee social stability, thereby exacerbating the nation’s spiral toward disaster.

Now take it one step further. Pakistan’s internal chaos makes it a national security threat to adjacent states, and even the world. The terrorist attacks last November in Mumbai, India, you might remember, were traced back to radical Islamists operating out of Pakistan.

In Pakistan, chaos reigns supreme.

Finally, imagine if Pakistan was situated on America’s southern border!
http://www.thetrumpet.com/index.php?q=5887.4259.0.0

This is the major story that should be front page on every newspaper and news website in the United States. These cartels are crossing the border at will.

The UK financial sector is in collapse. Rather than let the banks fail, the government is risking it all in one giant high-stakes gamble to prop up the system. It is really a no-win situation, however: Even if the bet pays off, the best the economy can expect is a slow grind-down. If the bet doesn’t pay off, the UK faces national bankruptcy. The fate of Britain’s whole economy may hang on this gamble.

The UK banking system has reached a breaking point. “The country stands on the precipice,” wrote the Telegraph. “We are at risk of utter humiliation, of London becoming a Reykjavik on Thames and Britain going under. … [T]he possibility of national bankruptcy is not unrealistic.”

Without government intervention, Britain’s biggest names in high finance would experience a short but exciting end to life. So, for the second time in three months, the government has felt compelled to act.

And act it has—in a dramatic and risky fashion. The new bailout plan will provide an additional £100 billion in capital and a £250 billion bank credit line to endangered banks. The government will also purchase more shares in the Royal Bank of Scotland.

But most dramatic—and risky—is the government’s intentions to blanket guarantee the banking sector’s hemorrhaging balance sheets. The Telegraph’s Iain Martin described the plan as the creation of a “giant insurance scheme for bad debt, [and a] pledge to honor liabilities without limit.”

And therein lies the danger for Britain: Private banking risk has now become national taxpayer risk.

The money involved is astounding. Britain’s four big banks have leveraged themselves to the hilt with borrowed money. British banks have liabilities so vast they completely eclipse the entire UK economy.

The Royal Bank of Scotland alone has £1.8 trillion worth of liabilities—three times the annual UK government spending budget. The bank asserts that it has assets worth in excess of that amount, but as write-downs, surprise revelations and forced government nationalizations continue to rock the market, few seem to believe any British bank claims anymore.
http://www.thetrumpet.com/index.php?q=5872.4237.0.0

Sound familiar? Let's look at the banking risk at little more closely...

I’ve been asked by some friends about why banks have not stabilized despite all of the money poured into them. The main reason is to simply understand that banks can maintain $8-$12 in assets against $1 in equity. To make things simple, if a bank has $10 in assets and $1 in equity and $1 of those assets are bad, the bank is in major trouble. Some of these banks maintained far more leverage than that, meaning it takes even fewer bad apples to wipe out a bank.
http://seekingalpha.com/article/117338-the-state-of-financial-markets-and-u-s-dollar-in-2009-part-ii?source=article_lb_articles

Jan. 29 (Bloomberg) -- Draft legislation that would change how over-the-counter derivatives are regulated might prohibit most trading in the $29 trillion credit-default swap market.

As much as 80 percent of the credit-default swap market is traded by investors who don’t own the underlying bonds, according to Eric Dinallo, superintendent of the New York Department of Insurance. Dinallo last year proposed outlawing so-called “naked” credit-default swap trading. He shelved the proposal in November because of progress by federal regulators on broader oversight of the market.

JPMorgan Chase & Co. held $87.7 trillion of derivatives as of Sept. 30, more than twice as much as the next largest holder, Bank of America Corp., which had $38.7 trillion, according to data from the Office of the Comptroller of the Currency. Of the holdings at New York-based JPMorgan, 96 percent were in the OTC market, compared with 94 percent for Bank of America.

The largest positions at JPMorgan and Bank of America, based in Charlotte, North Carolina, were in interest-rate swaps. Banks enter into interest-rate swaps with clients such as cities or hospitals that sold bonds and seek protection against adverse moves in interest rates. They also hedge their exposure to rates in the inter-dealer market.

The OCC data only included U.S. commercial banks, so Morgan Stanley and Goldman Sachs Group Inc. weren’t listed at the time. Both New York-based investment banks converted to banks regulated by the Federal Reserve on Sept. 21.
http://www.bloomberg.com/apps/news?pid=20601087&sid=alJeSkFOeGXk&refer=home

How's that for risk? Nearly $88 Trillion in one bank. Makes the numbers in the UK article (Royal Bank of Scotland) look very small in comparison.

It is noteworthy that JP Morgan is a dealer for the US Federal Reserve/US Treasury, and it is troubling that it is responsible for over half of all derivatives, as revealed by Stephen Lendman who relates: "The derivatives problem is especially ominous. At extreme levels and very dangerous. An estimated $180 trillion held by commercial banks alone meaning those with most of it are technically insolvent. JP Morgan Chase holds half of it. An "unprecedented concentration of risk in modern US history." The large counterparty default risk in this market isn't understood. Currently the Office of the Comptroller of the Currency (OCC) reports credit derivatives exposure (or risk of trading partner default) at $465 billion. Up 159% from 2007. Failure to address the derivatives time bomb "leaves a gaping hole through which financial panic can spread."
http://my.opera.com/richardinbellingham/blog/show.dml/2679689

BIS report highlighting traded derivatives...
http://www.bis.org/publ/qtrpdf/r_qa0809.pdf#page=108