STAFF NEWS & ANALYSIS
DB Briefs: EU Crisis Is Real / US Declares War on Pakistan? / Idiot Economists / Phony '60s Missile Gap
By Staff News & Analysis - September 30, 2011

EU Crisis Is Real … UK has become a nation of zombie companies … When it comes to supporting UK manufacturing, the Coalition government's record has so far proved almost as disappointing as the last one's. Britain has become a zombie economy. Capital is no longer being allocated. – UK Telegraph

US Declares War on Pakistan? … For the first time in history, an ally – one which has taken $22 billion of American money since 2002 – stands accused of committing an effective act of war against the US. – UK Telegraph

Idiot Economists … Obama's Jobs Plan Prevents Election-Year Recession in Survey of Economists … President Barack Obama's $447 billion jobs plan would help avoid a return to recession by maintaining growth and pushing down the unemployment rate next year, according to economists surveyed by Bloomberg News. – Bloomberg

Phony '60s Missile Gap … U.S. Invented Soviet Threat … According to former CIA agents and historians participating in a forum held at the John F. Kennedy Library in Boston, in the early 1960s the U.S. government invented the so-called "Missile Gap" and wildly over-estimated the number of ICBMs the Soviet Union had. How many ICBMs did the Soviets actually have? Four, according to declassified documents. – InfoWars et al.

EU Crisis Is Real

UK has become a nation of zombie companies … When it comes to supporting UK manufacturing, the Coalition government's record has so far proved almost as disappointing as the last one's. Britain has become a zombie economy. Capital is no longer being allocated. – UK Telegraph

Dominant Social Theme: When bailouts are implemented, companies are saved. And who cares about price discovery anyway?

Free-Market Analysis: Plenty of explanations for the "recession" of 2008-2011 (and counting) have been advanced over the past years. But here at DB, we've stuck to some fundamental observations to explain what's going on, and we've reported on them numerous times.

For the mainstream press, the US$20 to US$50 TRILLION that was issued into the world's economy in 2008 to "enhance liquidity" has already gone down the memory hole. But we remember. That's a lot of money to forget.

In fact, we're of the opinion that the current economic system – the dollar reserve system – died in 2008. You can't flood the world with multiple trillions and end up with a functioning economy. The human brain is likely incapable of visualizing 50 trillion dollars. It's an incomprehensible sum. And it's gummed up the global economy.

The issuing of this impossible amount of currency has done a number of things, none of which are for the most part acknowledged by the mainstream media or even by the alternative 'Net media. First of all, people (normal people) are aware of the elite money giveaways. To them it doesn't look like a substantive policy – it just looks like a bunch of rich people propping up "their" financial system.

In fact, that's exactly right. This elaborate charade was presented with some level of dignity in the 20th Century but collapsed utterly in the 21st Century when the Internet exposed it. In a single decade, central banks have gone from possessing an almost religious aura to being a laughingstock.

Of course, the "system" still defends central banking and uses the same arguments as ever to justify it. This only shows the essential lack of imagination – and the paucity of justifications – that pertain to the practice.

The elite still doesn't "get it." What's been lost is the moral justification. People see the central banking system as a scam now, even when they can't quite explain it. And that's what's going to kill it eventually. Or at least seriously reconfigure it.

Then there's the issue of exactly what all that money has accomplished. We've argued that so much money propping up so many different industries and companies has virtually severed the relationship between investors and price information.

Investors – institutional or not – simply cannot tell a good company from a bad one. This is the basic fact retarding any recovery that might take place. In the name of "salvaging" the economy, the elites have frozen it. Here's more from the Telegraph:

One of the curiosities of the recession is how few corporate insolvencies there have been for such a sharp economic contraction. Something is getting in the way of the process of "creative destruction" usually associated with recessions – the natural market mechanisms that would allow one generation of companies to be replaced by another. Capital should get reallocated from non-traded goods and services to tradeables when the exchange rate falls as it has, but that's not happened. UK has become a nation of zombie companies …

The fact that banks dare not recognise large tracts of what are effectively bad debts – this is especially the case in overborrowed commercial property – for fear of the damage it would inflict on solvency may help explain why things aren't changing more swiftly. Britain has become a zombie economy. Capital is no longer being allocated efficiently.

The next step is to discuss WHY the elites felt it was necessary to salvage the system when the smart money at the top of the pyramid knows very well that these salvage operations are fundamentally ineffective. Was it just greed – and fear? Or was it a deliberate attempt to make matters worse? We wait with great anticipation for this article to be written. But we won't hold our breath.


US Declares War on Pakistan?

For the first time in history, an ally – one which has taken $22 billion of American money since 2002 – stands accused of committing an effective act of war against the US. – UK Telegraph

Dominant Social Theme: Pakistan must be punished, and the US intends to do it?

Free-Market Analysis: Is it time to expand the Afghan war to Pakistan? Our belief, stated many times, is that the Afghan war has been a disaster for the US and the City of London, which animates US wars. They didn't mean to lose it but they likely have. The Taliban/Pashtuns both in Pakistan and Afghanistan proved a much harder nut to crack than was anticipated.

Unlike a century ago, the City was going to triumph this time. In fact, the great central banking families have been trying to crush the Afghan Pashtuns for over a century now, as a prelude to global government. The rhetoric now emanating from Washington reveals again that victory in Afghanistan is far away and that frustration is overtaking common sense.

The Telegraph article excerpted above is notable for its angry rhetoric. "We are witnessing the death spasms of an alliance that has been in meltdown from the day it began … Relations between the US and Pakistan have reached a breaking point. Pakistan's deposed military dictator, Pervez Musharraf, told The Daily Telegraph yesterday that 'the United States must accept the compulsions of Pakistan' in using terrorist groups as instruments of foreign policy."

This is strong stuff and reveals the depth of elite frustration. The article goes on to make the point that whereas 70 percent of American supplies used to come through Pakistan, only 30 percent do now. This is a direct warning – in print – to Pakistan's leaders that they better stop supporting the Taliban and its allies and allow the US to destroy the safe-havens in Pakistan and scatter its enemies.

This will likely never happen, however, as the war has the shape of East vs. West – and the Punjabi elites, along with the Pashtuns, are united against a Western takeover of the "navel of the world." Instead, the Punjabi elite is turning to China as a US counterweight.

The rising rhetoric, then, begins to take on the shape of a new Cold War. Coincidence? Or do Western governments seek to create a new and more formidable series of global tensions? Maybe, as we have speculated in the past, the war on terror is not doing the job. As the world's economy continues to spiral downward, a bigger distraction is needed. A Pakistan/China opponent might fit the bill.


Idiot Economists

Obama's Jobs Plan Prevents Election-Year Recession in Survey of Economists … President Barack Obama's $447 billion jobs plan would help avoid a return to recession by maintaining growth and pushing down the unemployment rate next year, according to economists surveyed by Bloomberg News. – Bloomberg

Dominant Social Theme: A survey of economists shows that the Obama administration's plan to blow up major cities across the country will reduce joblessness tremendously.

Free-Market Analysis: Just kidding! But really, who are these "economists?" Are these the same economists who predicted that Obama's grossly expensive health care nationalization would somehow save people money? Or that several trillion dollars printed from nothing would "reduce" joblessness?

And here's an even bigger question. Any decent economist knows that price-fixing doesn't work and that it is inherently destructive – so why do virtually all mainstream economists endorse central banking, which in the modern era creates fiat money delinked from underlying assets (money from nothing)? How can economists argue that price-fixing destroys the relationship between prices and value, and then turn around and endorse the wholesale printing of currency, regardless of the economic consequences?

This jobs plan is more of the same. How on earth does printing money to pay people to work meaningless jobs qualify as a well-thought-out "jobs plan"? In fact, "jobs plan" is an oxymoron. Government cannot produce jobs, or not meaningful ones anyway. There's no value to be had in government planning or what it produces.

We know this because of human action. This is why government economics – econometrics – and the programs it spawns don't work. As soon as a program is issued into the larger economy people change their behaviors accordingly. Austrian free-market economists have a word for this, two words actually: "Human Action."

Human action tells us that jobs programs, like other government programs, are ultimately useless. Often they produce results which are simply a waste of money, and if they don't, well … that's probably just good luck.

These jobs programs are basically large patronage mills, throwing off cash to those lucky enough to be positioned in the right place at the right time. Any economist who's gone through a number of years of graduate school and then worked in professional situations must know this. And yet there is this:

"The plan prevents a contraction of the economy in the first quarter" of next year, said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston, who participated in the survey. "It leads to more retention of workers than net new hires."

Really, Mr. Herrmann? Spending money you don't have to create results you don't need … "leads to more retention of workers than net new hires?" On what planet?


Phony '60s Missile Gap

U.S. Invented Soviet Threat … According to former CIA agents and historians participating in a forum held at the John F. Kennedy Library in Boston, in the early 1960s the U.S. government invented the so-called "Missile Gap" and wildly over-estimated the number of ICBMs the Soviet Union had. How many ICBMs did the Soviets actually have? Four, according to declassified documents. – InfoWars et al.

Dominant Social Theme: Head for the hills! The Reds are coming! Or at least their missiles.

Free-Market Analysis: According to the good folks at InfoWars, the missile gap was just another concocted subdominant social theme designed to frighten the West – and especially Americans – into giving up wealth and power to the military-industrial complex and the central banking families it serves.

"The Eisenhower administration used aerial reconnaissance and imaging satellites like the Corona Satellite to discover that the Soviets did not have the advanced technology to threaten the U.S.," according to the article.

"The study of the Missile Gap period is especially relevant because it relates to today's situation in Iraq, North Korea and Iran," said historian and author Fred Kaplan and Timothy Naftali, director of the Richard Nixon Presidential Library and Museum and a former Harvard student.

Here's more: "The invented Missile Gap – an extension of the supposed Bomber Gap – is part of a larger reality that we never hear about and is not revealed in most history books: the entire Soviet threat was invented by Wall Street and the international bankers. In Western Technology and Soviet Economic Development 1945 to 1965 written by the late Antony Sutton, we discover that if not for a massive transfer of technology and money to the Bolsheviks in the 1920s and later, Russia would have remained an isolated and backwards rural society. Sutton drew his conclusions after reviewing State Department documents."

The Internet has been a tremendous invention, if only for the patterns it reveals. One can scan necessary information in hundreds of books and articles in a day that might have taken months, pre-technology. The build-up of facts and the relationships between certain names that occur over and over finally becomes inescapable.

The light the 'Net has cast on 20th Century power elite sociopolitical and economic manipulations is truly incredible and disconcerting. In hindsight, it seems more and more clear that a tiny group of families gained control of a mechanism (central banking) that allowed them to print money from nothing and used this torrent of funds – trillions and trillions – to put the rest of the world on a path toward totalitarian globalism.

It wasn't just the missile gap that was concocted, in fact. There is plenty of evidence that both World Wars, the Cold War itself and other smaller, regional wars along with financial panics and the deaths of millions were part of what we have taken to calling "directed history." It was all kinda phony, in other words. Most people won't believe this of course, but the truth is sometimes difficult to acknowledge, let alone internalize. Sorry about that.

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