It’s December 31, 2009 and its an appropriate time to look back at 2009 and also look ahead to 2010.  With respect to economics, in 2009 we saw unemployment rise sharply; a continued decline in residential real estate; commercial real estate took a nose dive; the stock market hit finally hit a bottom and then rallied over 50%; the price of gold hit new highs; a surge in the war in Afghanistan and a continuation of war in Iraq; increased war rhetoric towards Iran; continued government bailouts for GM, Chrysler, the banks, the GSEs (Fannie Mae and Freddie Mac); municipalities on the verge of bankruptcy; a majority of U.S. states with severe budget problems; gun and ammunition shortages; increased homelessness; decreased corporate earnings… the list could go on.

In 2010, my belief is that the single most important thing that we need to understand is the debt problem of our federal government.  Porter Stansbury captures it in his article, This Little-Known Rule Could Send Gold to $10,000:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

I’m not necessarily endorsing his claim that gold could reach $10,000.  Maybe it does, who knows.  In my opinion, the purpose of owning gold isn’t to speculate with the hope of striking it rich, but rather its to secure your wealth.  In any case, the point of his article that I want to emphasize is that the U.S. federal government has a huge debt problem.  How are we going to resolve it?  I don’t believe we will.  What does that mean?  I don’t know for sure; nobody does but the consequences of failure will be disastrous.  If there is one word that I would use to describe the situation that will result because of the huge federal budget deficit and national debt it would be… zombies.

Note:  Inquiring readers may also want to read, Brace For Impact: In 2010, Demand For US Fixed Income Has To Increase Elevenfold… Or Else.

(http://thezombiesarecoming.wordpress.com/)

The zombies are coming, are you ready?

It’s important to recognize the major events that are happening that don’t always hit the mainstream headlines. We read the following from Cash-strapped US running out of unemployment money:

Twenty-five US states are running out of federal funds to pay unemployment benefits to jobless Americans.

According to The Washington Post, currently 25 states have been forced to borrow USD 25 billion from the federal government to keep their unemployed a float.

The Department of Labor estimates that by 2011 some 40 states will have run out of employment money and will b in need of borrowing USD 90 billion from the federal government.

State authorities currently have two options: Raising taxes or shrinking aid payments.

However, government consultant Leonard Simon says the federal government must create jobs at the state level. “It is surprising to see how wide spread it is” he said.

Meei Child is an unemployed citizen, since nine months ago, has been living off of unemployment benefits from the government which ends in March.

“There is a lot of frustration and anxiety with that,” Child told Press TV.

She is one of more than 15 million jobless Americans, who depend on their unemployment checks that average about USD 300 per week.

The White House recently taken measures that it hopes would create employment opportunities and Infrastructure revitalization, while providing USD 41 billion for unemployment benefits.

Addressing the measure US President Barack Obama said that “behind these statistics are people’s lives, their capacity to do right by their families. It speaks to an urgent need to accelerate job growth in a short term while laying a new foundation for lasting economic growth.”

And so the trend continues. Those in power at the federal level are obtaining more power over the states as the states are running out of money and are forced to seek help from them.  The solution by the federal government is to spend more money to “create jobs”.  The reality is that the federal government has to borrow (which really means inflation) or tax to be able to spend.  And the jobs that it creates aren’t productive to the economy by definition because the money used to create the jobs is taken, either by inflation or confiscatory taxes, from those who produce.

The end result is a bigger budget deficit and higher federal deficit.  Sooner or later (most likely sooner), no one will want to finance the U.S. debt because our economy won’t produce enough money to sustain it.  It’s like a person who has borrowed too much money and then loses their job.  Sooner or later they are going to default.  Eventually nobody will lend them anymore money.   So as the states lose their sovereignty, the federal government is driving our economy into the ground by increasing it’s huge debt load.  And as our economy weakens, the federal government will attempt to grab even more power.  In addition to bailing out the car companies, the banks, the housing sector, etc. they will openly step into stop riots and crime as homelessness, joblessness, hunger, and other basic necessities of life anger the average American.

Now is the time to save and prepare.  Get out of debt.  Store some extra food, water, and medical supplies.  Preserve at least some of your wealth through gold and silver.  Our economy isn’t improving and neither is the ability of our nation to finance its debt.  The zombies will come.

I had taken a break from blogging mostly because I just ran out of time.  It’s  almost been a year since my last post.  The itch has returned however and I’m going to start posting once more.  I’ve met quite a few people within the last year and hopefully you all will enjoy the truth, sarcasm, cynicism, love, tears… and whatever else happens to end up on this blog.

Since the itch returned, I read over some of my previous posts. At the risk of sounding arrogant, I have to say that some of them were remarkably prescient.  So in addition to reading my future posts, I encourage you to read over some of my past ones too since the message they promote still applies.  The zombies are coming!

Normally I post some excerpts of articles to demonstrate or reinforce a view.  In this case, I found this entire article so well written that I thought I would put a link to it rather than copying and pasting it into a block quote.  It explains why inflation is inevitable by showing why the government will create it.  It also offers sound arguments against dissenting opinions.  This article reconciles the opinions of those who are shouting “deflation” with those who are shouting “inflation”.  Here is the link again, I highly recommend reading the article in its entirety:

http://safehaven.com/article-12254.htm

Oh, and just a reminder… the zombies are coming.

State unemployment systems are crashing due to being overwhelmed.  Excerpts from an AP article:

ALBANY, N.Y. (AP) — Electronic unemployment filing systems have crashed in at least three states in recent days amid an unprecedented crush of thousands of newly jobless Americans seeking benefits, and other states were adjusting their systems to avoid being next.

About 4.5 million Americans are collecting jobless benefits, a 26-year high, so the Web sites and phone systems now commonly used to file for benefits are being tested like never before.

Even those that are holding up under the strain are in many cases leaving filers on the line for hours, or kissing them off with an “all circuits are busy” message. Agencies have been scrambling to hire hundreds more workers to handle the calls.

And in California:

California has seen a record number of calls to an 800 number over the last few weeks.

“During this holiday period we’ve been averaging a record of more than 2 million call attempts a day, and it took more than 20 times before people could get through to our UI call centers,” said Employment Development Department spokeswoman Patti Roberts.

That’s about twice the one-day record of call attempts set in 2004 during an earlier recession, she said.

Twice the one-day record!  Callers making 20 attempts before getting through!  Wow!  Why doesn’t it surprise me that the government can’t deal with a problem that they created.  What is our government going to do when 1 out of every 10, 9, 8, or even 7 people are unemployed and pissed off because of government inefficiency?  Those zombies will unite!  Here is what happened in Argentina after the economic collapse there.  It’s part 1 of 12 and is very good.

Do you think that this type of thing can’t happen here?  Argentina was the world’s 8th wealthiest country following WWII but due to government corruption and increasing socialism (sound familiar?) the economy collapsed. 

I can almost hear the sounds of angry mobs in the California air.

Here is a great post from Mish at www.globaleconomicanalysis.blogspot.com about what happened in 2008 and what to expect in 2009.  I don’t disagree with any of it.  Here are some excerpts:

2008 brought a continuation of the housing crash, massive foreclosures, rising unemployment, the collapse of Bear Stearns, the bankruptcy of Lehman, a $700 billion bailout that most citizens were against, fear mongering by Bush and Paulson to get the bailout bill passed, a ponzi scheme right under the nose of the SEC by Madoff that wiped out as much as $50 billion, hundreds of mortgage lenders imploding, and a stock market crash that was down as much as 51% finishing the year at -38.5%.

We also witnessed a credit crunch, soaring corporate bond yields, a commodities boom and crash with oil soaring to $140 then falling to $36, record low yields in treasuries, the nationalization of Fannie Mae and Freddie Mac, and a bailout of AIG that has already cost taxpayers over $100 billion. Sadly, socialism was embraced while free market principles were shot and left for dead. Worldwide, the Fiscal Insanity Virus Spread Rampantly.

Finally, 2008 was a year of the biggest ever declines in the CPI, auto sales, consumer sentiment, home sales, home prices, and treasury yields which actually went negative on a couple of occasions. The only comparable period in US history to this sequence of events was the Great Depression.

…

2008 is the year the impossible happened, the impossible being deflation. Deflation was called on this blog and a few other places but the idea was essentially mocked as impossible by the masses.

…

Themes For 2009

Looking ahead in 2009 here are some things I see as likely.

Obama will pass a stimulus package of $850+- billion but $300 billion will be “tax relief” amounting to $19 a week at most. $19 a week per household is not going to stimulate much of anything but it will add to the budget deficit. People will use that money to pay down bills, which is exactly what they should be doing with it.

The first 3-5 months are going to be extremely weak on the jobs front with 400,000 or more jobs lost each month. Obama is going to need to create 2-3 million jobs just to counteract job losses in first half of the year. There is no way he is going to create jobs that fast given implosions in state budgets and retailers.

In 2009 consumers will continue to retrench, housing will continue to decline, and as many as 100 small or regional banks will implode over falling commercial real estate prices. The Fed may arrange shotgun marriages with these banks instead of letting them go under.

He continues to get into specifics about what will happen with the stock market, the dollar, gold, inflation, etc.  I urge you to read the whole thing to know what to expect and how to prepare yourself for the continued zombification that will come.

As I’ve searched for the truth behind the conflict between Israel and Palestine, I’ve found nobody that has a better understanding than Joel Skousen.  I’m going to quote a large section of his January 2, 2009 World Affairs Brief.  While quite long, it’s well worth the read:

GAZA: HOTBED OF TERROR AND HOW IT GOT THAT WAY

In foreign affairs things are never as they seem. In the current Israel-Gaza conflict, it isn’t as simple as “they fired rockets at Israel and Israel is attacking in self-defense.” The larger question is how did those thousands of rockets get into Gaza–an enclave supposedly cut off from all the world by rigorous checkpoints? Yes, some crude short range rockets are built inside Gaza, but all the parts and explosives have to be brought in, as well as the larger, medium range rockets of Russia design, now being manufactured in North Korea, Iran and around the world. All these weapons are imported through a myriad of tunnels that run under the Egyptian-Gaza border. Egypt knows this and looks the other way. Israeli intelligence also has eyes and ears all over Gaza and knows this too, but doesn’t act until it’s too late. Why? To understand what’s really going on inside Israel, Gaza, the West Bank and the whole Middle East, you have to understand the secret back room deals that the US and Israel have made with the various Palestinian factions. You have to see who is funding and backing the belligerents, and who has the real power to call the shots. We will never know all that is going on behind the scenes but this week I’ll help you sort out the fact from the fiction.

First, some background: I’ve delayed covering the Israeli-Palestinian conflict in any detail because it is so convoluted and complex. Now that we have a major flare up going on in Gaza, it’s time to set the record straight–not an easy task. Sorting out all the details would take several books. I only have the space to give my readers an overview.

There are two major opposing points of view on Israel floating around America, neither of which is fully true. Each uses part of the truth to cover for numerous distortions.

The most prominent is the establishment point of view adhered to by all the major US Israeli lobbies, and the most conservative Christian Churches, especially the mega-ministries run by John Hagee and Rick Warren and others–that Israel is fulfilling God’s Biblical mandate as a homeland for the Jews and is only acting in self-defense against Arab attacks–and is therefore worthy of our unconditional support.

The second view holds that the entire creation of Israel was a Zionist plot and that those same Zionist Jews have used ignorant Christian support to help conspiring Jews to gain control over all Western governments, which now threatens the freedom of the entire world. Naturally, the various pro-Israeli and Christian lobbies label this view as conspiratorial, extremist and anti-Semitic.

The first PRO-ISRAEL view errs NOT in its allegiance to the Bible’s prophetic mandate for a homeland for Israel, but in viewing the government of Israel as the legitimate implementation of that divine mandate. It is not. In fact, honest Jewish and Christian supporters of Israel have been deceived about this, just as American conservatives were deceived into believing that George W. Bush was a Christian and conservative. In point of fact, the various governments of Israel since Menachem Begin have only been playing the role of “Israel first.” Begin was the last of the Israeli Prime Ministers actually fighting for Israel’s interests. Each subsequent Israeli government, even though falsely labeled as “right wing” has made many secret agreements with Yasser Arafat and other terrorists and have entered into conspiratorial combinations with various globalists forces in Europe and America to undermine Israel’s security and set her up for an international takeover. The Vatican has also played a role in these behind the scenes plots to further international control, as a means of securing its vested interests to claimed historical property.

The Second ZIONIST view and its errors are more complex to explain. This view rightly makes the case that there is a conspiracy involved in all of this, but it fails to recognize that it is more complex than a simple Jewish conspiracy for power. That claim doesn’t even come close to explaining the historical origins of the Marxist Jews who started this nor the allegiance of those running the current crisis. There are two forms of Zionism, almost diametrically opposed to one another–a) the original Torah based religious fervor, longing for a homeland (proper and non-violent)–and (b) the hijacked Marxist version of Zionism (violent and predatory) that dominated the early Zionist leaders who actually had power in Israel during the 1948 war for independence.

That Marxist version of Zionism was later hijacked by the NWO globalists, so this wasn’t a purely Jewish conspiracy at all, even though there have been many Jews involved at various levels. These Jews did not join nor conspire because of their Jewishness, nor because they cared a whit about Jewish religion (most are atheists and despise orthodoxy Judaism). They are brought into the globalist halls of secret power because they are smart and ruthless hirelings that naturally gravitate to the centers of finance and world power. These have no allegiance whatsoever to any Godly mandate for the land of Israel. One need only observe their constant betrayal of Israel’s religious settlers–the beleaguered minority of honest religious Jews–to see their true colors. I’m not talking about the orthodox religious parties like Shas whose leaders are not honest and that betray the principles of the Torah. These religious leaders have become corrupted by making one deal after another with corrupt coalition governments in exchange for financial support–mostly of their religious schools.

It is my considered opinion that Jews represent only a minority of the very top leaders (which, except for the Rothschilds, are hidden from public view). They do predominate, however, at the second level, because they are such effective handlers of puppet presidents and kings–Henry Kissinger being one of the prime examples.

Israel is being supported unconditionally by the globalists because it is an engine for conflict creation, and because America’s knee-jerk sense of defense for Israel effectively guarantees monetary and military support for Israel no matter how egregious its crimes against civilians. Israel is also a major source of black operations through its Mossad–whether that be targeted assassinations of world leaders, or black arms shipments to controlled terrorists around the world. There is a seamless relationship between our CIA and the Mossad. The Mossad often does the CIA’s dirty work so that if caught the US has “plausible deniability.” Israel is also used as a back channel to funnel sophisticated weapons technology to the West’s future enemies like Russia and China.

That is why, when you see inside the secret deals they have been making with the Arab factions and leaders, there is no intent to ever have peace–only the continuation of secret monetary and military support for the most radical elements of the Moslem Brotherhood. These deals are recipes for conflict and will never lead to peace. In fact, it is the continual lack of peace that drives the useless concessions that Israel keeps making.

The media plays a very special role on both sides of the Israeli-Palestinian conflict. It always gives positive coverage to the peace initiatives of the international community, especially the Camp David variety–lots of show, but filled with secret deals the public is never allowed to see. The media also appears to be acting contrary to Israel by always playing up the amount of civilian damage Israel commits upon innocent Palestinians during their retaliatory attacks in Gaza or the West Bank. This is done in part because the media can’t get access to Palestinian areas unless they play the pro-Palestinian role. But its real purpose is to keep the opposing forces somewhat balanced so that violence in the Middle East rises like a never-ending crescendo. That’s the real reason why the US always gives an equal amount of foreign aid to Israel’s enemies in Egypt as it does to Israel.

International intrigue has always made the conflict worse. For much of their history together, common Israelis and Palestinians have traded amicably with each other and got along fairly well together. But now, due to constant and heavy-handed crackdowns by the Israeli government and their adoption of US style air power attacks, which destroys a lot of property and kills or wounds hundreds of civilians, Arab hostility toward everything Israeli is at a fever pitch. This growing hostility is easily exacerbated by radical Arab propagandists in schools and on television, but the real culprit are the Arab and Israeli leaders who are both fronting for larger conspirators who have anything but peace on their mind.

Historically, the Arabs have been funded, trained and controlled by the Russians–who still have a strong presence in Syria, Egypt, and Iran. But now placing the blame is not so clear cut. The US and British globalist governments play both sides of the street. They fund terrorism and fight terror (half-heartedly) so as to ensure there are plenty of excuses to intervene and control other nations and the Israeli and US populations. Even now, Arabs are still being armed and funded by Russia using its surrogates in Egypt and Syria. That is why Hamas has been able to maintain its arms pipeline through its tunnel system on the Egyptian Gaza border. These are not crawling type tunnels, but tunnels big enough to drive trucks through. Don’t be deceived by the appearance of a crackdown by Egyptian police on Gaza protestors. This is merely a token show of force to make it appear as if Egypt is not complicit in preserving these tunnels.

The US and Israel also tolerate this black market arms traffic–as well as the normal smuggling of food, and household goods that is typical of a restricted border area. The US and Israelis also ship arms and ammunition directly to “police” forces in Gaza and the West Bank during periods of truce–and the public wonders why terror never stops. The Israelis lie to their people about everything. They say they don’t negotiate with terror when they do all the time. They say they never release prisoners for hostages, but they do by the hundreds. They even have betrayed their own soldiers to Arab ambushes or attacks in order to justify larger wars. The Israelis set up Yasser Arafat’s secret bank accounts in Switzerland (through Marc Rich and others). One of the reasons the globalists never do root out terrorism in Gaza is that it leaves the world with a continual expectation that Israel should make some new concession to achieve peace. That’s been the rationale for all the latest releases of prisoners. But, most of these prisoners just go back into the ranks of the Hamas fighters.

The US trains Palestinians in the US in ways that defy reason–unless you understand the globalist conflict creation motives. Security forces from Palestine have been given terrorist training by the CIA (under the false guise of “counter-terror”) at their so-called “farm” in Virginia. But how is teaching Palestinian security forces the nuances of bomb building and detonation a counter-terrorist exercise? It can go both ways, and it always goes toward terror–not counter-terror. This CIA relationship began in earnest during the secret accords of the Oslo agreement back in the 1990s and have continued after every temporary “peace deal” brokered by the Israeli government, with collusion of the US.

…

The Political motives: I’ve just covered the larger issues that you won’t get elsewhere. There are, of course, lesser corruption and political conspiracies that operate simultaneously with the globalist agenda. These often get into the press, because they think greed explains everything. Israeli politicians acts as if they hate each other (sometimes true), but in reality, they collaborate on many things that are not good for the country. Only a few at the top fully understand the control system that works on all major parties.

As a review for new subscribers, keep in mind that the Labor party represents the old Left/Marxist elements in Israel. Its support is getting smaller every year since the PTB in Israel have agreed that a phony Right-wing agenda is much more effective at controlling the majority (who are interested in a successful economy and a proper defense). The Likud party represents the establishment “Right-Wing” and is led by Kissinger-protege Benjamin Netanyahu. It long ago abandoned the true Right and the patriotic settlers that originally supported it and, like the American Republican Party, is now merely a front for the globalists. But, it always keeps playing to the far right so as to corrupt its Right-wing constituents into unwise compromises and to position itself to accept the inevitable electoral backlash that comes when the current center-Right (actually Left) government gets into trouble. TheKadima party is a breakaway party from Likud that formed when Likud’s globalist/leftist leader Arial Sharon could no longer keep up his front as a Right-wing leader. He refused to form a coalition government with small parties further to the Right. Even though these religious parties can usually be bought by benefits for their religious schools and churches, they had tired of Sharon’s constant betrayals. Ehud Olmert, Sharon’s successor in Kadima (after Sharon’s incapacitating stroke), lost popular support after the disastrous failure of the Lebanon war with Hezbullah and because of his involvement in numerous corruption scandals. All the top leaders are corrupt. Only some get caught.

The current PM is a woman, Tzipi Livni, is very ambitious and unprincipled. She is locked into a political struggle in the upcoming elections with Defense Minister Ehud Barak (the former Leftist PM from Labor Party). Barak’s political popularity had been very low due to the appeasement defense policies of Olmert, of which he shared the blame. Suddenly, his stock is rising with his hard line response to Hamas in the Gaza attacks–but all that will turn to dust when another secret deal is made with Hamas to again protect the terrorists for another fight later on. Thus, at least part of what is going on in Gaza is to refurbish Barack’s and Livni’s image.

Haaretz correspondent Yossi Verter filed this report: “Two months after Ehud Olmert was elected as Israel’s prime minister, the Second Lebanon War broke out. Two months before Olmert departs, the military campaign in the south breaks out. But Olmert isn’t the story here; he’s on his way to the Prime Minister’s Bureau pensioners’ ward. Ehud Barak is the story here. The man who, until yesterday, had to remind the Israeli voter of his existence with self-ridicule on billboards and satirical shows is returning to the political ring with force. In the coming days, weeks maybe, Barak will stand in the center of the public’s attention. For better or worse, he’s in his element. The beginning of the raid in Gaza bears the wily and deceptive fingerprint of Barak, the Israel Defense Forces most highly decorated combat soldier [based upon fraud--his military cowardice was covered up to make way for his political career]. This does not make him the most suitable candidate for the premiership, but it may deliver him and his party from the humiliating defeat the polls are predicting.

“If, by the end of the operation, the general sentiment will be that Israel has once again failed to meet its goals, if rockets continue to land and Gilad Shalit remain captive, the public will turn their anger at Barak and Foreign Minister Tzipi Livni and power will drop like a ripe fruit into Benjamin Netanyahu’s lap [That is why this globalist has positioned himself to the Right, and why the US is pressuring the IDF to cease the operation before a successful conclusion].”

THE PEACE PROCESS IS DEAD

IPS wrote that “Formally, the Israeli-Palestinian ‘peace process’ appears set to continue, in line with the last UN Security Council (UNSC) resolution. But the chances of finding a resolution are virtually nil in light of Israel’s new campaign against the Gaza Strip. ‘Even before Israel’s latest bombardment of Gaza, the so-called peace process was dead,’ Magdi Hussein, secretary-general of Egypt’s Islamist-leaning Labor Party (officially frozen since 2000)… On Saturday (Dec. 27), Israel began a series of punishing air strikes throughout the Gaza Strip, which is controlled by Palestinian resistance faction Hamas. According to Israeli officials, the campaign comes in retaliation for rockets fired at Israel by Palestinian resistance factions… The current round of negotiations began in November 2007 with a peace summit in Annapolis in Maryland… The Annapolis summit was followed by a series of negotiations between Israeli Prime Minister Ehud Olmert and Palestinian Authority President Mahmoud Abbas. The PA rules the West Bank. Up until this point, however, Abbas’s frequent talks with his Israeli counterpart have failed to bring any gains to the Palestinian side, with Israel continuing to reject key Palestinian demands… include an Israeli withdrawal to pre-1967 borders [which cuts off most of Israel's water supplies and makes Israel such a tiny nation that it is highly vulnerable to military attack], the return of Palestinian refugees to what is now Israel [which would overwhelm the Jews in every election], and the establishment of a Palestinian state with East Jerusalem as its capital [allowing the Arabs to have unfettered access to build and rearm for another attack on Israel].” Israel’s sellout leaders would gladly agree to these except they cannot get away with it and still stay in power. The numerous right wing minority parties would rebel and bring down the government coalition.

“Abbas’s negotiations with Olmert have also failed to significantly reduce the number of Israeli military roadblocks riddling the Palestinian West Bank, or stop the continuous construction of Jewish-only ’settlements’ on occupied Arab land.” The report fails to acknowledge that the land was captured after the Arabs attacked and lost the last 5 wars, so this is hardly a clear cut question of Arab land. Second, the Israeli government has dismantled by force hundreds of Jewish religious settlements, but they do not do so to placate the Arabs. They do this because these are the most anti-government Jewish settlers–true Zionists and not globalists.

As Helene Cobban (Leftist) wrote, “The US’s actual power in the region is noticeably reduced from what it was in 2006. Ehud Barak, Ehud Olmert, and Tzipi Livni have launched the whole of the Middle East on a wild ride. Neither they nor their backers in Washington will be able to shape this outcome. The best we can hope for now is some kind of forceful political intervention from other, more neutral powers.”

As if on cue, French newspapers announced, “Israeli Foreign Minister Tzipi Livni said Israel is working toward a peace treaty while it is attacking targets of the Palestinian militant group Hamas in the Gaza Strip. Earlier this week, Israel rejected a 48-hour truce proposed by France. Meanwhile, Czech Prime Minister Mirek Topolanek said the European Union must take the initiative to seek a cease-fire in the Gaza Strip, noting the United States cannot be counted on at this time. He made his remarks as the Czech Republic took over the EU’s rotating presidency today. Mr. Topolanek said he is organizing a diplomatic mission to the Middle East that will look for a solution to the conflict between Israel and Hamas. The Czech news agency said the mission will include EU foreign policy chief Javier Solana, the bloc’s external relations commissioner.” Solana is a long-term Marxist and will follow the EU path of pushing for more aid and power for the Palestinian state.

Now this blog is devoted to helping people prevent themselves from becoming enslaved, zombie-like individuals.  So why do I write such a long post about Israel and Palestine?  As mentioned in Deflation, Zombies and You, I said:

I believe that the most important things you can do is to find the truth.  Increase your knowledge about the current events in the world.

So hopefully this post has helped you in your efforts.

I’d also like to mention that I really think Joel Skousen is a great writer and one of the best, if not the best mind that I’ve come across when it comes to political philosophy.  Check out his sites, www.joelskousen.com and www.worldaffairsbrief.com.  In my opinion, he is a true patriot which is the highest compliment I can give.

In my last blog, Desperate Deflation Discounts, I spoke about the period of deflation that we are in, what caused it, the effects of it, what will most likely happen in the future and also mentioned the effect that our economy is having on state governments.    So what does this mean to you?  It means that you need to know what to do so that you don’t become a zombie.

First of all, you need to recognize what is going to happen.  As I see it, a leading contributor of zombification is joblessness and homelessness.  We will see dramatic increases in both as this recession continues.  Official government unemployment numbers will at least reach 10% while the accurate unofficial numbers will indicate over 15%.  Homelessness will dramatically increase as foreclosures and job losses continue.  We will see more homeless families and people who are working but living out of their car.  We will see state and local governments dramatically cut back their spending and services since they are required to balance their budgets.  The federal government will dramatically increase spending on social programs.  The value of stocks will dramatically decrease.  (Note: We may see a temporary upswing in the markets until end of January or sometime in February 2009.)  Housing will continue to slump until sometime in 2012 and will most likely remain flat for sometime after.  As a result of state budget cuts, homelessness, joblessness, etc., I believe we will see civil unrest such as increased crime and riots.  We may even see a dramatic change in our political system such as the entrance of a third political party with some tangible influence.

So how do you prevent zombification from happening to you?  Here are a few tips.  Get out of the stock market unless you are a savvy investor who knows how to make money in a bear market.  Start saving and get out of debt.  Don’t buy a new house unless you recognize and are prepared for it to go down in value.  Invest in gold and silver and take physical posession of it.  In your current job, work hard and go the extra mile… in other words, be the best employee that you can.  Ultimately, you want to do everything in your power to avoid the effects of this economic disaster.  This involves obtaining a good understanding of what is the ultimate cause of this disaster and any other upcoming event that can further zombify/enslave you.

I believe that the most important things you can do is to find the truth.  Increase your knowledge about the current events in the world.  Don’t implicitly trust everything you read from the mainstream media (MSM).  It’s not that they flat out lie, it’s that what they spread represents only a certain viewpoint which doesn’t contain the whole truth.  So be diligent and open minded in your search for answers to what is going to happen and what is causing it.

In addition to your search for truth regarding world affairs, the best prevention from zombification and enslavement (for I would submit that being a zombie, in other words, not having a job or a home, is a form of slavery as you are virtually at the complete mercy of the state and have little power or recourse to affect change in your life) comes from living an honorable life.  For true power lies in the honor that is given to us by others.  And having true power leads to true freedom.  Now we obtain honor by gaining trust and respect from others by living a life of virtue.  So, if our goal is ultimate freedom, the most important thing we can be doing is to find out how to live a life of virtue and righteousness and strive to live by what we find.  And from where can we obtain this truth?  I submit that this is found by obtaining the truth about the nature of God and his will for us.  The truth relative to righteousness, godliness, virtue and love will come from the entity that is the very definition of good — God. 

This is much easier said than done.  It is probably fair to say that there is more subject matter relating to God than any other subject.  My opinion is that the place to start is with yourself.  Do an honest self evaluation to see if you really do want to know.  If so, examine yourself and find if you have a hope that you can find out.  This hope will lead to a determination to find out.  It will lead to action.  It will lead to an open mind and open heart.  It will lead you to ask God himself in humble prayer over and over until you start to receive answers little by little.

Retailers of all kinds are desperately attempting to get rid of excess inventory reports this article from the NY Times:

An era of desperation marketing is at hand, with stores and automobile dealerships adopting virtually any tactic that might grab the attention of frightened consumers.

After one of the worst holiday seasons in decades, businesses are doing whatever they can to clear their shelves and make way for spring merchandise. Sales of 50 percent off stopped capturing the attention of customers weeks ago, so stores are layering discounts on top of discounts, and trying to lure shoppers with promises of giveaways, bulk bargains and other gimmicks.

These discounts are an indication of the terrible state of our economy.  They are happening because natural economic deflationary forces are causing a correction.  Deflation means a decrease in the supply of money and credit.  What we are witnessing now has been caused by the bursting of the recent bubbles in housing, commodities (i.e. oil) and stocks which had been artificially inflated by the dramatic increase in available money by central banks, like the Federal Reserve, and governments around the world.  Simply put, governments and central banks made money/debt very easily available to increase consumer spending to boost the economy.  Well, it worked… for a time.  You can only go into debt so much until it all comes crashing down.  We spent on TVs, cars, houses, stocks, toys, clothes, you name it!  And as a result of all of this money in our system, our houses went way up in value.  Our stocks went up in value.  And where did we get this money to spend?  We borrowed it. So our false boom was all a sham.  And now people/business don’t want to lend anymore.  People can’t borrow anymore and so they can’t spend anymore.  And that is why we are crashing in a downward deflationary spiral.

Don’t worry though.  Our government is “responsible” for our economy!  They were so very smart to get us into this mess that they will graciously get us out!  And just like they knew how to manage the economy during the last ten years, they will know exactly what to do to fix it!  What is their solution?  Why, spend more of course!  How are they going to get the money to spend?  Well, they can’t take from the American taxpayer anymore because we have no savings and are already heavily in debt.  So they are going to borrow MORE money!  In other words, they are going to do the same thing that got us into this mess!

So what does this mean for the future?  Well, this deflationary process is actually the cure, not the problem to our disease of debt.  But our government hates deflation because it makes it harder to pay back the massive debt that it has incurred.  So our government will attempt to borrow and spend our way out.  It will cause inflation sometime down the road which will make our money worth even less.  So just like liquidation and falling prices are a manifestation of deflation, so is consumer and corporate frugality.  This will be evidenced by the dramatic increase in job losses.

And it’s not just consumers and corporations that are going broke, but it’s also local and state governments.  Check out “44 States Face Huge Budget Shortfalls” by Michael Shedlock (Mish)

At least 44 states faced or are facing shortfalls in their budgets for this and/or next year, and severe fiscal problems are highly likely to continue into the following year as well. Combined budget gaps for the remainder of this fiscal year and state fiscal years 2010 and 2011 are estimated to total more than $350 billion.

States are currently at the mid-point of fiscal year 2009 — which started July 1 in most states — and are in the process of preparing their budgets for the next year. Over half the states had already cut spending, used reserves, or raised revenues in order to adopt a balanced budget for the current fiscal year — which started July 1 in most states. Now, their budgets have fallen out of balance again. New gaps of 42 billion (9% of state budgets) have opened up in the budgets of at least 41 states plus the District of Columbia. These budget gaps are in addition to the $48 billion shortfalls that these and other states faced as they adopted their budgets for the current fiscal year, bringing total gaps for the year to nearly 14 percent of budgets.

I can’t predict the future but there is one thing I’m sure of — we are going to see more and more people turning into zombies as they lose their jobs, lose their homes, and their pride and dignity.

My friend forwarded me an article about the horrific holiday season.  Here it is in its entirety:

NEW YORK (AP) – The fallout from the horrific holiday season for retailers has begun, with the operator of an online toy seller filing for bankruptcy protection and more stores are expected to do the same – meaning more empty storefronts and fewer brands on store shelves. A rash of store closings, which some experts predict will be the most in 35 years, is likely to come across areas from electronics to apparel, shrinking the industry and leading to fewer niche players and suppliers.

The most dramatic pullback in consumer spending in decades could transform the retail landscape, as thousands of stores and whole malls close down. And analysts expect prolonged woes in the industry as the dramatic changes in shopping behavior could linger for another two or three years amid worries about the deteriorating economy and rising layoffs.

“You are going to see a substantial retrenchment in the retail industry,” said Rick Chesley, partner in the global bankruptcy and restructuring group at international law firm Paul Hastings. “The downturn has been catastrophic.”

A number of stores couldn’t even make it to Christmas. Circuit City Stores Inc. (CC) filed for bankruptcy protection last month. It plans to keep operating, but toy seller KB Toys, which filed for bankruptcy earlier this month, is liquidating its stores and will shut down.

The survival prospects for many more stores are dimming as more sales data comes in about the crucial holiday shopping season, which can account for up to 40 percent of a retailer’s annual profit.

Holiday sales fell from 2 percent to 4 percent compared to a year ago, according to SpendingPulse, a division of MasterCard Advisors. Excluding gas and car sales, they dropped between 5.5 percent and 8 percent from Nov. 1 through Dec. 24, as key categories from luxury to electronics posted double-digit sales declines. Sales of electronics and appliances fell almost 27 percent, for example.

ShopperTrak RCT Corp. which tracks retail sales and customer traffic at more than 50,000 outlets, said Monday that it now expects foot traffic to be down 16 percent and sales to decline 2.3 percent for the November and December period.

The retail casualties, which were first among home furnishing stores and then many apparel stores over the past year or so, are expected to cut across all sectors as shoppers have slashed their spending on nonessentials, from TVs to jewelry.

About 160,000 stores will have closed this year and 200,000 more could shutter next year, said Burt P. Flickinger III, managing director of consulting firm Strategic Resource Group. That would be the industry’s biggest contraction in 35 years. In March and April of next year, Flickinger expects 2,000 to 3,000 malls to shutter.

AlixPartners LLP, a turnaround consulting firm, predicts that 25.8 percent of 182 major retailers it tracks are either facing major financial distress or will face a significant risk of filing for bankruptcy in either next year or 2010 – the highest level in the 10 years that the firm has been compiling the figures. That compares with the 4 percent to 7 percent that it predicted would face financial woes in the previous two years.

Among the most vulnerable are retailers that have debt coming due soon and had relied on solid holiday sales to generate cash, said Matthew Katz, managing director in the firm’s retail performance improvement practice. But he said he’s also watching merchants whose debt is not due until later in 2009 or 2010, but are paying big interest payments as they struggle with high debt loads and shrinking revenues.

Some of the retailers that analysts say they are watching carefully are struggling regional department store Bon-Ton Stores Inc. (BONT), of York, Pa., and apparel retailer Goody’s Family Clothing Inc., which filed for bankruptcy protection in June but emerged from Chapter 11 in October. Officials from Bon-Ton and Goody’s did not immediately return calls seeking comment.

This week Parent Co., the operator of etoys.com, filed for Chapter 11 bankruptcy protection and said it will consider selling some or all of its operations. Chris Byrne, a New York-based toy consultant, said that etoys.com couldn’t compete with the aggressive tactics embraced by Toys R Us and Wal-Mart Stores Inc. (WMT), the nation’s top two toy sellers.

Retailers who do file for bankruptcy are also under more pressure now than in the past because of 2005 changes to the code that cut down the amount of time they have to file a complete reorganization plan, said Ken Simon, managing partner at Loughlin Meghji + Co., a restructuring advisory firm.

Another big problem for them, Simon said, will be securing additional financing to keep operating because of the tight credit markets.

The dire problems facing retailers also spell bigger problems for suppliers, which have already been seeing merchants cut or cancel orders.

Allan Ellinger, senior managing partner at New York-based MMG, an investment banking and strategic advisory practice, foresees a shakeout in the apparel industry and said those who survive are going to have a hard time meeting the financial needs of stores.

He estimated that apparel companies have slashed their 2009 spring inventory by 20 percent to 25 percent from a year ago, because they would rather be reacting to hot sellers than be stuck with too much merchandise.

“You have to go into deep survival mode,” Ellinger added.

I like that last line.  Companies are going into deep survival mode.  I warned of this “black Christmas” in “Have a Zombie Christmas” and “The Calm Before the Storm” and preparations for this fallout should already have begun.  The consequences from this horrific Christmas are coming and will manifest themselves in the form of more zombies.