FTW Economic Alert

verfasst von JüKü, 11.07.2002, 17:42

FTW Economic Alert
Global Economic Collapse Imminent,
Pension Fund Disaster;
Stocks, Dollar To Free Fall, Gold To Skyrocket
By Michael C. Ruppert
7-8-2

[Ed. Note: The last time FTW issued an emergency
economic bulletin to its subscribers was Sept. 9. At
that time a derivatives investment bubble on the verge
of implosion, a 900-point drop in the Dow Jones
average and a pending liquidity crisis signaled a
crash on the order of 1929. Only the attacks of Sept.
11 and massive intervention from the U.S. Treasury and
Federal Reserve prevented the collapse. Investors
blamed the ensuing market losses on the attacks.

The situation now is much, much worse as more factors
combine to suggest that foreign investors and trust in
the U.S. economy might soon be a thing of the past.
Your pension is at risk today and your home may be at
risk in six months to a year.

One economic analyst has suggested that a nuclear
exchange between India and Pakistan might be the
perfect cover for the biggest financial wipe out in
human history. I think that an ill-conceived and risky
invasion of Iraq might serve the same purpose. From
consumer confidence, to corporate accounting, to the
dollar, to gold, to foreign capital flight, to pension
fund wipe outs, to the derivative bubble, to debt,
there is not a single economic indicator that is not
flashing red.

The warnings are as clear, explicit and
well-documented as were the warnings received by the
U.S. government throughout summer 2001 that a
terrorist attack against the World Trade Center would
take place during the week of Sept. 9 using hijacked
airliners from United and American airlines. Nothing
was done to prevent that and apparently nothing is
being done now in spite of the fact that $4.2 trillion
of your money has been stolen right in front of your
eyes.

There was no single reason for the attacks of 9-11. I
have cited oil, drug cash and geopolitics as three of
the primary motives for the U.S. government s
complicity in allowing the attacks to happen. But what
also cannot be overlooked is the fact that 9-11
effectively masked a major economic crash that was
certain to occur. That crash was not been averted by
the extraordinary financial maneuverings of the Bush
administration that followed 9-11. It was merely
postponed for a very short time.--MCR ]


c. 2002 From The Wilderness Publications,
www.copvcia.com. All Rights Reserved. May be copied or
distributed for non-profit purposes only. May not be
posted on any internet web site in its entirety
without express written consent. Contact
mruppert@copvcia.com.

July 8, 2002, 4 PM PDT (FTW) -- Reuters, London
published a story June 27 based upon an interview with
billionaire financier George Soros. The headline read,
Soros Blames Bush Factor for Dollar s Fall. George
Soros is a man to be reckoned with. Emerging from WWII
as someone who allegedly cooperated with Nazi
occupation troops by identifying assets to be seized,
the European financier is one of the most powerful
financiers on the planet. He is credited with
successfully assaulting the currencies of several
nations, including Britain s pound. He recently
participated in the World Economic Forum in New York
where he was seated on the dais with the likes of
Zbigniew Brzezinski, Hillary Clinton, Shimon Peres and
academics from Ivy League colleges. It is more than
just a case that when Soros speaks, people listen. The
truth is that when Soros speaks, markets move.

His comments were brutal.

The international financial system is coming apart at
the seams &There is a lack of confidence. That s what
I call the Bush factor in the economy. There is a
liquidity crisis in financial markets, said Soros.
Everybody s going home. The Swiss banks are going
home. The strengthening of the yen clearly shows
repatriation. Translated, that means that foreign
capital is fleeing the United States in the wake of as
yet not fully realized accounting scandals that will,
according to Fox News on July 6, take an estimated
$600 billion in value out of the U.S. stock market
this year. One of the many smoke alarms triggered by
this is the fact that the U.S. economy needs an
estimated $1.5 trillion per year in new foreign
investment just to remain solvent.

Reuters quoted Soros as saying that the global
economic downturn had exposed the weaknesses of
corporate America and how the U.S. administration runs
the international economic system.

Soros is aware of what FTW and noted economic thinkers
like Catherine Austin Fitts, former assistant
secretary of housing, and British economist Chris
Sanders of Sanders Research have been saying for
years: as much as half of the value of the U.S.
financial markets is derived from criminal endeavors,
whether it is the laundering of drug money or the
fraudulent cooking of financial statements to boost
profits.

PUMP AND DUMP

It s a simple scheme really. The mafia knows it quite
well. By whatever means necessary, drive a stock s
price higher and higher. Make it look like a mover,
even if it s a dog. Cook the books and get suckers to
buy in, helping to drive the price even higher. When
you think the balloon will pop, call all your buddies
and sell your shares. That effectively steals all the
money that the suckers put in. When the stock crashes,
the suckers who weren t part of the scheme will take
the loss, whether they be individual investors or the
New York City police and fire pension fund.

The U.S. stock markets have been pumped to the
breaking point, and they are trying very hard to dump
right now. Most sober analysts have agreed for a long
time that the prices are over-inflated by as much as
50 percent or more; that price/earnings ratios, now
averaging more than 30-1, should properly be corrected
to about 15-1. That means the Dow should be at 5,000
or lower. We ll talk about how the meltdown is being
temporarily prevented later. It is first necessary to
examine the severity of the crisis.

If I mention the bookkeeping problem that s
threatening Wall Street right now and asked you how
many companies were being investigated for or had
announced overstated earnings, how many would you say?
Six? Eight? Try 17.* Seven of them are energy
companies, and this adds another degree of imperative
for Congress to force the White House to compel full
disclosure from Vice President Cheney s 2001 energy
task force. But he has a problem there too. One of the
companies under investigation for fraudulent
bookkeeping is Halliburton. Cheney was its CEO until
taking office, and the fraudulent accounting occurred
while he was the boss.

Did you think that WorldCom was a big one, having
illegally claimed $3.8 billion in earnings to boost
its share price? On July 5, according to Newsday, the
energy giant Reliant Resources restated its 1999-2001
earnings by chopping off $7.8 billion in revenue. Just
today it was disclosed on CNN that the pharmaceutical
giant Merck has overstated its revenues by $14
billion.

At the core of all these accounting problems is a
non-transparent form of corporate bookkeeping called
pro forma. As opposed to the more transparent and
rigid practice called GAAP (Generally Accepted
Accounting Practices), pro forma bookkeeping allows
for all kinds of manipulations like hiding debt as
income, double booking revenues and sneaking drug
money onto the bottom line. What has yet to be fully
explored by any of the major media is which other
major corporations use pro forma bookkeeping. The
reason is that all of the major media companies use it
too. Also on the pro forma system are GE (NBC),
AOL/Time Warner (CNN), Microsoft (MS-NBC), Viacom
(CBS), Disney (ABC), IBM, Intel, Cisco Systems, Sun
Micro, Tribune (the Chicago Tribune and the L.A.
Times), The Washington Post (Newsweek) and the New
York Times.

The accounting scandals are starting to nip at the
heels of these and other cornerstones of American
capital markets. Trading of GM shares was halted June
27 after unconfirmed market rumors of accounting
irregularities. And New York Times reporter Gretchen
Morgenson offered the suggestion in an April 14 story
that GE might be cooking its books. Thanks to PBS s
Lowell Bergman in a 2000 report, we already know that
GE has been called on the carpet for accepting drug
cash, lots of drug cash, as payment for the good
things it brings to life. So has Philip-Morris.

How much foreign capital can Wall Street expect to
attract, let alone retain if foreign investors
expected to be wiped out for leaving their money here?
American investors, especially pension funds are still
putting money in or leaving it in place in the stock
market. Are there other alarm bells that mom and pop
investors should be hearing? What will happen to the
value of the American brand name as a trustworthy
place to invest money if GM is ultimately revealed to
have cooked its books?

A look at the real health of the stock market is
revealing. On April 26, The International Forecaster
made two chilling observations:

At the time of the AOL Warner merger the combined
companies were worth $290 billion. They are presently
worth $85 billion. Their quarterly loss is estimated
to be $50 billion. This could be the business mistake
of the new century &

The downgrade of Bristol Myers Squibb to Aaa by Moody
s leaves only 8 AAA-rated companies left. They are GE,
UPS, AIG, ExxonMobil, Johnson & Johnson Berkshire
Hathaway, and Pfizer & Merck. In 1990 there were 27
AAA companies and in 1979 there were 58.

THE DOLLAR

Soros was extremely upset about what was happening to
the U.S. dollar, which has been falling against
various currencies for about a month. The key to
understanding this lies in the lesson I learned at an
economic conference in Moscow in spring 2001. Almost
all countries in the world use the U.S. dollar as
their reserve currency. They have bought trillions and
are holding them. If another currency becomes more
valuable or is viewed as more stable, then the world
will switch currencies, and trillions of dollars will
come back into the country -- inflation would be
inevitable and the dollar would lose its value.

In the week ending July 5, the dollar closed
consistently at or near parity with the Euro. As of
this posting it sits at (US) 99 cents and has been
hovering there for more than a week. Since various
economic reforms from the 1950s to the 1970s removed
the dollar from the gold standard it has been a fiat
currency, unconnected to any measure of intrinsic
value. The full faith and credit of the United States
-- along with its military -- have given the dollar
its value. The Euro is partially backed by gold and
there have been lingering but credible rumors for
years that the U.S. s gold reserves have been moved to
Europe.

Soros told Reuters, But the declines in the markets
have gone somewhat further than what would be the
natural consequences of the previous exuberance &

The decline in the dollar came as a surprise to me &I
attribute it to lack of confidence in the management
of affairs by the United States, its unilateralism,
the pursuit of national self-interests and not living
up to the responsibility of being the dominant
financial power in the world, not taking care of the
system.

What is Soros setting us up for? The pumping of the
stock market occurred while Bill Clinton was
president. Yet he s blaming Bush. Is another Herbert
Hoover being created before the big crash? The signs
are there. Britain s paper the Independent ran a June
28 story headlined, WorldCom scandal: Currencies:
Latest Wall Street disaster sends investors all over
the world running for cover. The lead read, The U.S,
dollar yesterday moved to the brink of free fall, a
nightmare scenario for the world economy, after
reverberations from the WorldCom scandal triggered
panic among investors.

That was before the announcements about Reliant and
Merck.

The story painted a glum picture. This is threatening
to become a disorderly market, David Bloom, global
economist at HSBC said. There s no better way to show
loss of confidence in a country than through its
currency.

Quoting another financial expert, the Independent
reported, If the dollar s decline turns explosive,
this could compound the problems of the U.S. asset
markets as currency losses raise fears of massive
capital flight out of the U.S.

GOLD

For years the price of gold -- the ultimate smoke
alarm signaling a failing economy -- has been
artificially suppressed by paper traders who are
capable of flooding the commodities markets with gold
future options when the price needs to be kept low.
Why low? Because rising gold prices have always
signaled inflation and/or a lack of faith in the
financial markets. Years of efforts by the Gold
Anti-Trust Action Committee, or GATA, while not being
successful at halting or fully exposing the artificial
manipulation of gold prices by the Federal Reserve,
major banks, the Bank of International Settlements and
major commodities traders, have opened the eyes of
many to overt manipulations in gold pricing.

As one investment banker told me recently, there is
five times more paper gold than there is actual gold
out of the ground. If gold prices ever pop they ll be
out of sight.

Over the past year, certainly since 9-11, gold prices
have often moved in exactly the opposite direction
(lower) from what conditions would dictate. The
financial effort required to do this requires the
support of powerful state banking institutions and
cash to service the paper. Gold has risen in price
>from around $280 an ounce nine months ago to a high of
around $327 in recent weeks. That s a return on
investment of 16 percent -- far better than the Dow
has done this year.

In our last economic bulletin FTW noted that the Dow
had lost close to 900 points. Since March of this year
it had lost, before the profit-seeking 300-point rally
of July 5, almost 1,600 points. Yet even as the
economic news worsened last week, the price of gold
peaked and then started to fall. As of this writing it
sits at $312 an ounce. The gold price dropped as the
worst economic news was hitting the streets. Why?

As one astute gold watcher, Jay Taylor, summed it up
in an October 2000 newsletter, Every single time there
is concern about a stock market debacle, gold is
bombed. Always.

On June 5 GATA described one of the recent moves to
fiddle with gold prices. MiningWeb.com has just
reported an explanation for the plunge in the gold
price today. The plunge, MiningWeb says, came in the
wake of a large after-market trade in New York last
night, with an unnamed fund liquidating 5,000 futures
contracts, a move which knocked the price first to
$326/oz, then to $324/oz, and finally to $321/oz, &The
sale was executed using the Access system on Comex,
which allows for anonymous trading by large funds.

There are unmistakable signs of market manipulation
now with regards to both gold and stocks. Who is it
that keeps the markets from correcting, only making
the inevitable crash that much worse? It s called the
Plunge Protection Team, or PPT. And now it has to have
the liquidity to flood both the gold and the stock
markets with enough cash to keep the bubbles from
bursting. This, at the same time that major banks like
J.P. Morgan/Chase and Citigroup sit atop huge
derivatives bubbles that have been estimated at
between $150 trillion and $300 trillion. Most major
U.S. banks have heavy exposure as a result of the
mushrooming financial scandals. All of these bubbles
require cash, and this is the liquidity Mr. Soros is
rightly worried about.

Rep. Ron Paul, R-Texas, has been challenging the gold
manipulation for years. He has been one of the few
fiscally sane voices anywhere on Capitol Hill. His
website has a listing of his writings and much needed
legislation he has or is sponsoring.

Only recently have there been signs that the PPT is
also working in the U.S. equity (stock) markets.

THE PLUNGE PROTECTION TEAM

The Washington Post acknowledged the existence of a
select group of four who could and would intervene in
markets to prevent massive capital flight and a run on
shares that would cause an economic collapse if there
weren t enough cash to pay out during a massive sell
off. In his Feb. 23, 1997 story headed Plunge
Protection Team, Post reporter Brett Fromson
identified the Federal Reserve chairman, the
Securities and Exchange Commission chairman, the
chairman of the Commodities Futures Trading
Commission, and the secretary of the Treasury as the
team s key players. The intervention of the team in
the 1998 crash of Long Term Capital Management, after
it became wildly overexposed in the gold market,
revealed that private institutions such as Goldman
Sachs, J.P. Morgan, Merrill Lynch and other major
banks could be involved as well.

Fromson quoted a former team member as saying, In a
crisis, a lot of deference is paid to the Fed. They
are the only ones with any money. Or, I might add, the
ability to print it.

Pointing to the 1987 stock market crash, the single
largest crash in history, Fromson observed, The Fed
kept the markets going by flooding the banking system
with reserves and stating publicly that it was ready
to extend loans to important financial institutions,
if needed.

On April 5, 2000 New York Post reporter John Crudele
reported that the stock market had turned back from
the abyss. After a 500-point drop that looked like it
was leading to a meltdown, &someone started buying
large amounts of stock index futures contracts through
two major brokerage firms -- Goldman Sachs and Merrill
Lynch &Unless the brokers tell, there is no way of
knowing which of their clients were making the
purchases &Then the market rebounded.

Calling it the PPT, Crudele both referred to the 1997
Washington Post story and suggested that private banks
were acting as team captains.

Gold activist David Guyatt, relying on information
obtained from GATA Chairman Bill Murphy, pointed to
the PPT in October 2000. The hand of the Plunge
Protection Team (PPT) is clearly visible for the first
time. The entire short gold play over the last few
years is a technique that has been used to prop up key
stocks and fund futures operations. In the simplest
form it works like this. Borrow (at negligible
interest rates) someone s [America s, Germany s,
Britain s, Goldman Sachs ] gold and sell it in the
market. This gives a handsome pool of
near-interest-free dollar cash. Whenever the stock
market looks shaky, or key stocks come under pressure,
dive in and buy, buy, buy &

But it is not only necessary to manipulate the stock
market to succeed. It is also necessary to manipulate
the gold price and keep the price of gold below the
price PPT sold the leased gold for &This is a game of
double jeopardy &The problem the PPT now have is that
there is virtually no more official gold left to
borrow, wrote Guyatt.

The causes of this intervention were a pending NASDAQ
crash and the imminent downgrading of IBM and Intel
stocks.

And the PPT s hand has been noted recently from as far
away as Australia. Progressive Review Editor Sam Smith
recently quoted a story by Richard Bromby of the
Australian Financial Review:

At 2:32 Wednesday [June 26, 2002], New York time,
something extraordinary happened at the corner of Wall
and Broad streets. The New York Stock Exchange s Dow
Jones industrial index -- struggling since the opening
bell after the WorldCom fraud revelations -- threw off
its problems. From an intraday low of 8,926.6, the Dow
shot skywards to its high of 9,160 at 3:29 PM &Could
it be the work of the much talked about, but never
seen, Plunge Protection Team? There is a belief that
this team represents a powerful and secretive hand
that is ready to act at any time the Dow looks ready
to tank big-time &

&London s Observer newspaper last October reported it
had information the plunge team was preparing to spend
billions of dollars to avert a repeat of 1929 and
1987.

The problem is clear: With a strong dollar the PPT has
demonstrated that it has enough cash to suppress gold
prices or to save the stock market. It may not have
enough cash to do both -- especially if the dollar
were to suddenly lose its value. Then, all of the
chickens that have been locked out will come home to
roost with a vengeance.

As The International Forecaster reported on April 26,
The American consumer has run out of credit and buying
power &All bets are off if the housing and credit
bubbles break and that s a distinct possibility
&Debtor s prison is drawing nearer. House and Senate
conferences are deciding on a new set of rules for
Chapter 7 bankruptcy &If the Plunge Protection Team
weren t manipulating the market with all these
scandals, the Dow would already be at 4,500.

REALIZING THE EXTENT OF THE DESTRUCTION

Not all of the money looted from American taxpayers is
going to support the PPT market manipulations. A lot
of it is just being stolen.

According to the Standard and Poor s website, domestic
equity allocation (stock market) of U.S. pension fund
investments was near 50 percent by the end of the
1990s. It has topped 50 percent since then.

Before the 2000 presidential election, candidate
George W. Bush promised that he would tap the Social
Security Trust Fund only in the event of war,
recession or national emergency. On Sept. 11, he was
quoted by his budget director, Mitch Daniels, as
saying, Lucky me! I hit the trifecta!

It s not a question about stealing a little here and a
little there. It s a question about open, full-scale
looting -- but only from the pockets of the American
people who, in my opinion, will soon have almost
nothing left. Let s look at the hard numbers of what
has been taken and from where. These numbers are by no
means exhaustive. It s just what we know about.

$34 Billion - Social Security in 2001 (USA
Today/Washington Post)


$160 Billion - Social Security in 2002 (est.) (House
Budget Committee)


$42 Billion - Federal Employees Retirement System
(Wall Street Journal 6/13/02)

(to Meet 2002 budget deficits)


$2 Billion - Civil Service Retirement and Disability
Fund (ibid)


$1,100 Billion - Stolen from the Dept. of Defense --
1999 (Cong. Record and Insight Magazine)

$2.3 Billion - Stolen from the Dept. of Defense --
2000 (CBS News)


$59 Billion - Stolen from HUD -- 1999 (Cong. Record)


$600 Billion - Shareholder Equity Lost to Financial
Fraud -- 2002 (Fox)


$4,297 Billion TOTAL




Pending Thefts:

$845 Billion - Social Security (by 2010) (Washington
Post citing Cong. Budget Office figures)

An anecdotal story reveals the damage to pension
funds. If you think that Social Security will be a
safety net, please read the above section again. Of
course we all know about the Enron employees who were
wiped out. But according to the New York Times on
April 3, New York City s pension system has lost $9
billion in the wake of recent stock scandals. Imagine
the impact if local governments declared bankruptcy or
defaulted on their pension obligations. It has been
estimated that the California state employee
retirement system (CALPERS) has more than 90 percent
of its money invested in the stock market.

A WORD ABOUT HOUSING

Most Americans believe that their homes are their
last, best retirement insurance. Yet many Americans
have mortgaged their homes for 120 percent of value.
Their loans are backed with the full faith and credit
of the U.S. government through various agencies such
as Ginnie Mae, Fannie Mae, Freddie Mac, and the
Federal Housing Authority.

The International Forecaster has predicted that 40
percent of Fannie and Freddie s loans are going to
come back and haunt them. We envision an S&L type
bailout of $2.4 trillion down the road. This will be
the biggest financial disaster in history.

The full faith and credit of the U.S. government lie
behind these home loans. If the homeowners go broke in
an economic crash, they default. If the U.S.
government goes broke -- before or after that point --
it defaults, and the holders of U.S. debt ultimately
have the right (especially under WTO and
globalization) to foreclose on the collateral -- your
home loans. In the worst case scenario most of the
United States could legally be owned by all of the
countries holding U.S. debt -- better described as
T-Bills, or U.S. gold, or U.S. stocks.

CONCLUSION

The Great Depression was not an event that wiped out
U.S. capitalists. It was an event that made the rich
even richer by transferring the wealth of the people
into the hands of the wealthy. Legendary is Bank of
America s rise to affluence through real estate
foreclosures from 1929-37. Don t believe for a minute
that the richest of the rich will be hurt by the
coming collapse. The only ones hurt will be you and
me.

George Soros is a member of the Bilderberger Group, a
collection of the wealthiest individuals on the
planet. It includes, from the U.S., both Democrats and
Republicans, and from Europe and Asia the richest old
money that can be found. U.S. participants in this
year s conference included David Rockefeller, Henry
Kissinger, former Treasury Secretary Larry Summer,
former CIA Director John Deutch and George Soros. It
was just after this year s meeting which ended in
early June, that all of the revelations about
corporate fraud started to really hit the news. One
wonders if it had been on the agenda.

I also note sadly a recent financial report from the
Denver area stating that mortgage foreclosures were
going through the roof. This, at the same time that
Reuters (July 2, 2002) reported that corporate layoff
announcements had risen by 12% in one month. In this
context Bush s tax cuts seem worse than bad judgment.
As former Ass t Secretary of Housing Catherine Fitts
pointed out to me in a last minute e-mail, By 2010,
when (and if) the Bush tax reductions are fully in
place, an astonishing 52 per cent of the total tax
cuts will go to the richest one per cent & Put another
way, of the estimated $234 billion in tax cuts
scheduled for the year 2010, $121 billion will go to
just 1.4 million taxpayers.

Unless you can convince me that gravity might suddenly
reverse direction, this collapse is inevitable and
imminent. It will be unspeakably brutal. How long do
we have? Maybe weeks. Maybe months. Maybe only days.
But the house of cards is already starting to collapse
all around us. A major terrorist attack, the folly of
an invasion of Iraq or a nuclear exchange between
India and Pakistan would only be a momentary diversion
>from a much greater tragedy.

Suggested Resources:

www.sandersresearch.com

www.solari.com

www.gata.org

www.house.gov/paul/

* -- Enron, WorldCom, QWest, Tyco, ImClone, Martha
Stewart (the company), Global Crossing, Dynegy, CMS
Energy, El Paso, Halliburton, The Williams Co., Clear
Channel (which owns approximately 1,200 radio
stations), Adelphia, Reliant, Motorola and Merck.
[Source: CNN and various news services]

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• FTW Economic Alert - JüKü, 11.07.2002, 17:42