International Forecaster Weekly

Fed Monetisation is a Political Power Tool

The West and the collapse of regimes in the Middle East, strategic reserves considered, Inflation causes speculation, monetisation is a political power tool, Madoff's ponzi scheme allegations mishandled, less full time work for workers, derivatives trading on the increase,

Bob Chapman | March 9, 2011

The result of western intervention in the Middle East has been and will continue to be a collective general collapse of current regimes. The replacement will supposedly be populist governments, when in fact that will not be the case. From behind the scenes will emerge leadership tied to the CIA, MI6 and the Mossad. These new governments will look like they are anti-west and anti-capitalist, but that will not be the case. Their overthrows have been in the works for years and all the new players are in place. Unrest will probably continue over several months perhaps for a year. A solution will be found for Libya and the west hopes their puppet regime in Saudi Arabia stays in place.

Nigeria has its own problems and seems calm except for the ongoing civil war between Christians and Muslims. That has been progress for 50 years between the Ibo and the Hunza tribes. The Christians have learned to live with the majority Muslim government.

Iraq has its own set of problems politically, but the country is still guarded by 50,000 or more US troops, as western oil interests pump their oil as fast as possible.

We believe any major disruption in Saudi Arabia would not only be met by local troops, but by US forces as well. Saudi pumps more than 8 million barrels of oil a day and the west cannot stand such a disruption. The region produces almost 17 million barrels a day, or almost 23% of total world production or 56% of OPEC production. Political upheaval should not last more than 3 to 6 months. The result will be turmoil for some time to come; a social and political situation that neutralizes any opposition to the regional aims of the US and Israel. It won’t take long for Mr. Gaddafi to be deposed and sent on his way and it could be with the help of US troops. Western oil interests would like that very much.

Many experts believe the surviving regimes will be anti-west and anti-capitalist, but we think that will not be necessarily so. These countries will want to pump oil and pump it as fast as possible, because generally speaking they have no other source of income. There will be lost oil production, but if Saudi Arabia is not involved in upheaval they can make up most of the lost production. Presently the only obvious problem is with Libya. The Saudi’s have said they will make up the lost Libyan production knowing full well they will have to pump three times Libyan production due to high sulphur content in Saudi production. Overall it can be expected that regional production overall will fall perhaps as much as 30% to 50% under new governments. That is only a guess. We won’t know the result for some time to come and such developments will prompt other non-regional producers to increase production and that includes the US as well. One might say the key is Saudi Arabia. If its government were overthrown then the world would be in serious trouble. From a practical viewpoint looking at world production 10% to 12% could be lost, but it could be augmented elsewhere, perhaps over a few years.

During such a period oil demand could slow by partial elimination of growth and less consumption due to higher pries and slowing economies. Overall that could bring about a reduction in consumption of about 5%. That would only make up 50% of the shortfall. Such a calamity could take oil prices to $200 a barrel or more and gasoline prices could rise 150% that is from $6.00 to $9.00 a gallon. Such higher prices would cause major changes in society. In places where petrol products are subsidized there would be great shock. Mind you these assumptions include Saudi Arabia being sacrosanct. If Saudi falls the result would be a nightmare.

All in all the average American would see petroleum based costs increase $2,500 a year, which would reek havoc on consumption and GDP growth. This kind of factor is what deflationary depressions are made of. $300 oil would increase the balance of payments deficit by $800 billion annually and erase 4% of GDP. Inflation would rage, especially when assisted by higher food prices. Wall Street doesn’t as yet understand this, but when it does the stock market will certainly fall. If you pencil in the increase in monetary aggregates by the Fed and the rising fiscal deficit you end up with hyperinflation and stagnation simultaneously. We could be looking at budget deficits of $2.5 trillion annually and a balance of payments deficit of $800 billion. This means 14% inflation this year and perhaps 30% in 2012. These events would produce a dollar collapse. It would also collapse the economies, China and India, their currencies, and many others as well in non-oil producing countries.

The financial situation will be catastrophic. America and many other nations would look like the Weimar Republic in Germany in 1923. This is a real terminal trouble that we are headed for.

At this juncture this is where we separate from the economic and financial pack that really do not understand history and what is really going on. The powers behind the scenes long ago decided that it was time to bring about conditions that would lead to the implementation of world government. Just go back into the history of the last 1,000 years. These people have tried this over and over again, so to us this is no surprise. 99% of writers, economists and analysts do not understand as yet and most will never understand. Even if they do they are afraid to write about it, thus, the world suffers as result. The Pollyannaish attitude of professionals who should know better shows you how removed from reality they really are. The facts stare them in the face and they do not have the guts to properly interpret them.

As oil and gasoline prices head for the moon the White House tells us that the president is considering tapping into the strategic oil reserve to ease soaring oil prices. All that will do is delay the inevitable, like the use of price controls. The second reason and a powerful one is to generate cash flow to relieve pressure on the Fed, which has been buying 80% of Treasury and Agency securities. What would be done would be a drop in the bucket and when replacement time comes government probably will have to pay much higher prices for oil to refill the reserves.

There is no question that higher petroleum and food prices will kill any chance of economic recovery. Perhaps this situation has been created to cast blame on the Middle East - N. African situation to cover for a recovery, which had not become reality. This past Friday oil closed up $3.07 at $104.97, the highest level in 18 months, as fighting increased in Libya. There is considerable spare capacity and pumped reserves worldwide, but by the time nations, if they will, get into action prices could be considerably higher. The impact of these higher oil and food prices will change the mode of living in the first world and starve millions in the third world helping the elitists rid their world of useless eaters. If China stops adding to their reserves and the Saudis’ increase production, both would help the situation, but will China stop? As we write citizens in Saudi Arabia are demonstrating in the streets. Where will that lead? If Saudi falls to the people you can expect $300 oil, and that would even be more disastrous. In such a scenario the world would be engulfed in massive inflation and gold, silver and commodities would head straight higher. Even if Saudi stays the same and China cuts back the best that can happen is a reduction in prices of 10% to 15% and that is simply not enough. The bottom line is these actions are an exercise in futility. No easy way out. Incidentally, this did not have to happen; it was planned by the elitists that way.

It should be kept in mind that inflation was on its way long before this recent incident. Last year we predicted 14% real inflation in the US in 2011. We are currently somewhere between 7% and 9% and those numbers are about to escalate quickly. Remember, normally prices rise as a result of the Fed increasing the supply of money and credit, which translates in a general increase in the price to $850 billion in fiscal spending in QE1 and stimulus 1. We do not know the numbers on QE2 as yet, but we believe they are in the same area, along with stimulus 2 of $862 billion. The total has to be thus far between $900 billion and $1.7 trillion by the Fed. That is probably $5 trillion and there has been no recovery. We predicted this would happen and it has. If you remember last May we predicted QE2 and stimulus 2 before anyone else, and QE3 plus stimulus as well, and that is on the way along with higher unemployment, stagnant wages and hyperinflation, which will hit in 2012 or 2013. Central bank policies are not going to change, they cannot. It is the only thing left for them to do and as we said almost 12 years ago, it won’t work. Inflation causes speculation – a field generally left to professionals and a condition that does not create jobs or increase production. All it does is turn the economy into a vehicle that looks like a casino. This occurrence forces those on fixed incomes and the poor into poverty, while Wall Street and banking amass even more false wealth. This all causes a misallocation of resources and malinvestment, which is why such actions do not work. The system has to purge malinvestment and allow those who have used unsound practices to go bankrupt. It will all happen in time, but in the meantime the only guaranteed safe haven is gold and silver shares, coins and bullion. Only then can you protect your assets as 85% of the populace goes broke, just like in the 1930s and 1870s. These actions by the Fed and central banks only undermine the production of real wealth. It kills purchasing power. Money, paper money, loses its value and it leads us to hyperinflation, which is the loss of faith in the currency. Prices rise in the midst of inflation, but not because people want more for their labor or commodities, but because people are trying to get out of their currency. That is why as soon as they get paid they buy food and the necessities of life, before their currency is worth less in buying power. Why do you think FEMA just ordered $1 billion in dehydrated food? They are going to cost much more later. One major manufacturer will spend two years filling that order and will not be selling to the public over that period. The cutoff of the consumer market should send you to buy immediately before there is none left to buy. While these pressures increase Wall Street and banking go on their merry way committing their crimes and no one goes to jail, something we’ve been saying for more than 20 years, and something other writers are just discovering.

The game being played by government and the Fed of producing and propagandizing bogus CPI and unemployment numbers is becoming more widely known and in time few will believe anything produced by government. Stable prices translate into little or no inflation. We are far from that and it is getting worse. We are seeing the result of 11 years of monetary profligacy, the past three years being the worst.

It takes anywhere from six moths to three years for excessive money and credit to filter through the system dependent on the mode of delivery. Just watch by the end of the year government will admit to 45.5% inflation when in reality it will be 14%. This is what they did the last time around. We mention inflation because it is all part of the plan to bring the US, UK and Europe to its knees economically and financially in order to force citizens to accept world government. QE1 and 2 and stimulus 1 and 2 are hitting the monetary and financial system and there is no way they can be reversed. You now add such monetary and fiscal policy to the changes in the Middle East and N. Africa and you have major problems that only gold and silver related assets can save you from.

As the problems in N. Africa and the Middle East continue and civil war rages in Libya, we are being besieged with justification for a QE3 just as we suspect we would be. The National Association of Business Economics says continued Fed purchases of Treasuries will be needed if oil prices continue to climb. They believe $150 oil would present such a problem and solution.

The SPR, The Strategic Petroleum Reserve, has 726.7 million barrels of oil or a 34-day reserve at the US daily consumption of 21 m/b. If looked at another way it could last 58 days. A big question is would Asia, particularly China, stop temporarily buying for their strategic reserves? There certainly would have to be an agreement to make reduction work. The US Energy Secretary says Saudi Arabia will increase oil production to push prices lower. China holds 39 days of consumption in its reserves. There is absolutely no guarantee that China and others will stop filling reserves. Recently the Philippines said it would require oil companies to have 15 days of supply on hand. This aspect of the crisis is still up in the air. The stage widens and the problem becomes more complex. We are now looking at long-term changes that will change the way we live.

Last week the Dow gained 0.3%, S&P 0.1%, the Russell 2000 rose 0.4% and the Nasdaq 100 gained 0.6%. Banks fell 2.4% and broker/dealers 1.5%. Cyclicals rose 2.9% and transports fell 0.9%. Consumers added 0.1, utilities rose 0.5%, high tech fell 0.3%, semis 0.8%, Internet 0.8% and biotechs rose 1.0%. Gold bullion rose $20, the HUI rose 3.3% and the USDX, dollar index, fell 1.15 to 76.40.

Two-year T-bill rates fell 3 bps to 0.685, 10-year notes rose 8 bps to 3.49% and the 10-year German bunds jumped 12 bps to 3.27%.

Freddie Mac’s 30-year fixed rate mortgages were off 8 bps to 4.87%, the 15’s fell 7 bps to 4.15%, one-year ARMs fell 17 bps to 3.23% and 30-year fixed jumbos fell 4 bps to 5.42%.

Fed credit jumped $13.3 billion to another record $2.519 trillion, and yoy it is up 11.3%. Fed foreign holdings of Treasury, Agency debt fell $3.6 billion to $3.384 trillion. Custody holdings for foreign central banks rose $416 billion yoy or 14%.

M2 narrow money supply increased $10.6 billion to a record $8.894 trillion yoy, or 4.3%.

Total money fund assets were little unchanged at $2.751 trillion.

Total commercial paper rose $17.4 billion to $1.064 trillion. That is up $95 billion ytd and that has to be the work of the Fed.

The interest burden of the US national debt is $200 billion in interest, but within 10 years it will be $928 billion or almost a trillion dollars. That would be 17% than the government would pay to provide health care to the elderly through Medicare that year, and 82% more than the cost of all non-security discretionary spending programs combined.

A third of all US households already cutting back on spending due to rising gasoline prices and that was at $3.20 a gallon. The RBC Consumer Outlook Index fell to 42.5 from 44.5. Forty-seven percent believe that their current financial situation is weak.

Senior citizens who thought they escaped the pocketbook pain of Illinois' major income tax increase soon could find they didn't elude the taxman's grasp after all.

Influential Senate President John Cullerton on Monday suggested the state should start taxing retirement income. Illinois does not currently tax pensions or retirement funds such as 401(k) plans, but Cullerton suggested that the idea be in the mix as part of an effort to change the state's outdated tax system.

"It would just be a matter of fairness," Cullerton, D-Chicago, told a City Club of Chicago luncheon.

Details are still being ironed out, but Cullerton said the state could bring in $1.6 billion a year if retirement income was taxed at 5 percent, the same as the personal income tax rate that until January's hike stood at 3 percent. But Cullerton said he wants to exempt those with "modest pensions" or who rely only on Social Security and instead focus on those who could most afford the additional tax.

"For example, (former) Gov. (Jim) Edgar's pension is $130,000 a year, and he pays no tax," Cullerton later added. "Someone like him would probably be willing to pay a state income tax on a portion of that."

Imposing a tax on retirement incomes could be a politically difficult prospect. Seniors make up a potent voting demographic. Even the successful attempt to end free CTA rides for the elderly, a cost many seniors said they could afford, proved tough to get through the General Assembly.

"We're talking about going from zero to 5 percent," said J. Fred Giertz, a professor of economics at the University of Illinois at Urbana-Champaign. "That's not going to be an easy thing to sell."

Democratic Gov. Pat Quinn said he hadn't seen details of Cullerton's proposal but indicated that "everything should be looked at."

"It's important that we always be open to reviewing the tax code," Quinn said. "How we go about it is obviously something we have to work together on."

Cullerton said he would move forward with the idea only if he won some Republican support. To that end, Cullerton has vowed the extra money would not be used to expand programs, but to provide tax relief elsewhere, such as lowering the income tax rate or providing additional tax credits for low-income workers.

Republicans were guarded, saying they need more specifics.

Sen. Matt Murphy, R-Palatine, said he wanted to weigh whether Cullerton's plan would result in "meaningful tax relief," adding that "the concept of raising taxes on anybody doesn't really appeal to me."

Murphy and Sen. Kirk Dillard, R-Hinsdale, said they are concerned that additional taxes would force high-income seniors to flee to Florida, which does not have an income tax. They said an exodus of retirees would be costly to Illinois because the state would lose sales tax revenue as people spend money in other states.

Bob Gallo, senior state director for AARP Illinois, said the state cannot in good conscience ask seniors to pay more when it is cutting services for the elderly.

Quinn has proposed a series of cutbacks the group said could result in seniors losing home-delivered meals and prescription medicine. Quinn also has suggested cuts to the state's circuit breaker program that AARP said would take away property tax relief from more than 300,000 seniors and prescription drug aid to 188,000 seniors.

"We're taxing you more at the same time that we're taking away these other things," Gallo said. "These are extraordinary times. There's a lot that needs to be examined and explained before we go down this road."

In 2008, Illinois taxpayers received $37.3 billion in retirement income, including pensions, retirement annuities and Social Security, according to the nonpartisan Commission on Government Forecasting and Accountability. If taxed at 5 percent, that amount of retirement income would generate $1.9 billion. That figure would drop to $1.5 billion if Social Security income is not taxed, the commission's calculations showed.

Revenues would drop dramatically if only the highest retirement incomes were taxed. For example, imposing the tax on everything over $50,000 in pension income would generate an additional $276 million. Taxing everything over $100,000 in pension income would raise just $70 million, said Sue Hofer, spokeswoman for the Illinois Department of Revenue.

 The inspector general of the Securities and Exchange Commission has opened an investigation into allegations that the agency mishandled potential conflicts of interest in its response to Bernard Madoff’s Ponzi scheme.

The action by David Kotz comes as congressional Republicans have been pressing SEC chairwoman Mary Schapiro for an explanation of what she knew about and what action she took on the alleged conflicts.

Kotz said by e-mail yesterday that he had called an investigation.

Representative Darrell Issa, Republican of California, chairman of the House Oversight and Government Reform Committee, and Senator Charles E. Grassley, an Iowa Republican, the ranking Republican on the Senate Judiciary Committee, said in a statement Thursday that Schapiro had allowed her general counsel to represent the agency on Madoff issues “without fully properly examining’’ his financial interest.

The Republicans’ criticism was the toughest since it came to light that former SEC general counsel David Becker and his brothers inherited and then liquidated a $2 million Madoff account years before the 2008 collapse of Madoff’s fraud. Becker rejoined the SEC as general counsel in early 2009 and left the agency last week.

Lawmakers are trying to determine whether a criminal law was violated, according to Hudson Hollister, a counsel for Issa’s committee. In a letter to Schapiro on Thursday, Issa and Grassley cited a federal law that they said prohibits federal officers from participating in proceedings in which they have a financial interest.

The Becker brothers were recently sued by the trustee trying to recover money for Madoff’s investors, seeking to recover $1.5 million of payouts from their family account. In his role at the SEC, Becker helped frame the agency’s position on how much money investors should be entitled to recoup in the Madoff bankruptcy.

Many investors have been fighting to establish that they are owed the full, bogus amount shown on their last account statements.

But in ongoing litigation, the SEC has rejected the investors’ position, siding instead with the trustee. The SEC has argued that investors’ claims should be limited to what they put in minus what they took out with one exception: Unlike the trustee, the SEC has argued that investors should also receive an inflation adjustment on the money they deposited with Madoff.

Becker participated in the Madoff matter after consulting the SEC ethics counsel and getting a green light. The ethics counsel, William Lenox, gave Becker approval on May 4, 2009, about 25 minutes after Becker sought guidance, according to an exchange of e-mails the lawmakers released Thursday. Issa and Grassley said the ethics counsel acted without independently verifying the facts. [This shows you the complicity between the SEC and high-connected firms on Wall Street. There is no question they are an integral part of the ongoing criminal conspiracy that infests Wall Street. For more than 50 years they have done everything possible to aid and abet these criminals and at the same time doing their best to destroy middle-sized and small brokerage firms, brokers and newsletter writers. It is incredible that this has gone on for so long. With us as one of the few publications that have tried to expose these violations of law until just recently. Bob]

Fewer Americans must settle for part-time jobs for lack of full-time work, and factory overtime is on the rise, indicating the pace of payroll gains reported by the Labor Department today is sustainable, economists said.

The number of people working part-time for economic reasons fell for a fifth month in February to the lowest level since January 2009, the Labor Department said today in Washington. Factory workers put in an average 4.2 hours of overtime last month, the most in more than three years.

“There is only so much overtime you can make your workers work before you have to add,” employees, said John Canally, an economic strategist at LPL Financial Corp. in Boston. “Some of the nitty gritty” of today’s Labor Department report “does point to future gains in coming months.”

Employers in the U.S. added 192,000 workers in February, the most since last May, the report showed. Private payrolls grew by a more-than-forecast 222,000, and the jobless rate unexpectedly declined to 8.9 percent, the lowest level since April 2009.

Factory overtime is rising as manufacturers ramp up production in response to rising global and domestic demand. Overtime rose to an average of 4.2 hours in February for production workers, the most since July 2007. Manufacturing, which accounts for about 11 percent of the U.S. economy, has added 112,000 jobs in the last four months.

Intel Corp., the world’s largest chipmaker, is among companies planning to increase payrolls. The Santa Clara, California-based company announced plans to build a $5 billion plant in Arizona and hire 4,000 employees in the U.S. this year. Intel is stepping up production to satisfy renewed demand for chips following the recession.

The number of people working part time for economic reasons fell to 8.34 million in February from a peak of 9.51 million in September. The decline suggests that part-time workers are moving into full-time positions, said Ellen Zentner, a senior U.S. economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. [97,000 jobs were created via the birth/death ratio which are totally bogus, which means the total jobs created were not 192,000, but 95,000. The chicanery continues.]

 

Global derivatives trading on exchanges increased 25 percent to 22.4 billion contracts last year, the World Federation of Exchanges said.

Futures trading increased 35 percent last year to 11.2 billion contracts while options trading rose 16 percent to 11.1 billion, according to a statement from the Paris-based trade group, which has 52 members that list a total of 45,000 stocks around the world. Volume was 17.8 billion in 2009, WFE said.

“Reforms in regulation of over-the-counter derivatives markets are causing participants to shift some of their risk transfer activities to exchange-traded derivatives,” Ronald Arculli, chairman of WFE and chairman of Hong Kong Exchanges & Clearing Ltd., said in the statement.

The outstanding notional amounts of private over-the- counter derivatives fell by 13 percent from June 2009 to June 2010, WFE said, citing data from the Bank for International Settlements.

Derivatives are contracts that have values determined by the underlying assets. Futures are agreements to buy or sell an underlying commodity or financial product at a determined later date. Options give the right, without the obligation, to buy or sell a security at a certain price by a given date.

 

White House Chief of Staff William Daley said on Sunday the Obama administration was considering tapping into the U.S. strategic oil reserve as a way to help ease soaring oil prices.

Speaking on NBC television's "Meet the Press," Daley said: "We are looking at the options. The issue of the reserves is one we are considering. It is something that only is done and has been done in very rare occasions. There's a bunch of factors that have to be looked at. And it is just not the price."

"All matters have to be on the table when you see the difficulty coming out of this economic crisis we're in and the fragility," Daley added.

Congress has pressured the Obama administration to look to the emergency oil supply to ease consumers' fears over rising gasoline prices, which are threatening again to top $4 per gallon at U.S. gas stations.

Higher oil prices could undermine the fragile U.S. economic recovery and politically damage President Barack Obama as he moves toward his 2012 re-election bid.

While the White House has said governments around the world had options, including oil reserves, that could be used to prevent an inflationary price spiral due to oil supply disruptions, none have taken the rare step of tapping into their oil reserves.

U.S. oil prices jumped on Friday to more than $3 a barrel to $105.17, their highest level since September 2008, as fighting in Libya worsened and protests in the Middle East intensified.

The International Energy Agency said the revolt in Africa's third-largest producer had blocked about 60 percent of Libya's 1.6 million bpd (barrels per day) oil output, largely due to the flight of thousands of foreign oil workers.

On Thursday, U.S. Treasury Secretary Timothy Geithner played down the risks to the oil supply from political disturbances in the oil-rich Middle East and North Africa in testimony before a congressional panel.

He said there was "considerable" spare oil production capacity around the world and "substantial" reserves on hand.

"If necessary, those reserves could be mobilized to help mitigate the effect of a severe, sustained supply disruption," Geithner told the U.S. Senate Foreign Relations Committee. Geithner said high food and oil prices were causing hardships in many parts of the world. But he said Americans were feeling less impact.

There has been support among Senate Democrats for tapping America's emergency oil supply to cool gasoline prices.

Senator Jay Rockefeller urged Obama on Thursday to allow a "limited draw-down" from the oil reserves, to "protect our national security by preventing or reducing the adverse impact of an oil shortage.

But Republican Senator Lamar Alexander, speaking on CNN's "State of the Union" on Sunday, said he would not support the oil reserve drawdown.

On Wednesday, U.S. Energy Secretary Steven Chu ruled out releasing oil from the reserve, saying ramped-up oil production in Saudi Arabia should lower the crude price.

"That's going to mitigate the price increase," he told reporters. "We're hoping market forces will take care of this."

Tapping the Strategic Petroleum Reserve, created in the mid-1970s after the Arab oil embargo, is a relatively rare event. It has been U.S. policy to turn to the emergency supply only when faced with a major supply disruption.

It was last done in 2005 following Hurricane Katrina, helping to drive oil prices down by about 9 percent.

British finance Minister George Osborne on Friday signaled he would cut the country's fuel tax to counter soaring oil prices. A one penny-per-liter rise in the fuel duty planned by the previous Labour government was due to take effect in April. [This is not what the strategic oil storage was accumulated for; this is an attempt by government to try to smooth out the elevation of oil prices which is bound to come perhaps to $200.00 or more. This exercise in futility would load the general fund with major amounts of money, which politicians of both parties would identify as a reason not to raise taxes or cut spending. Bob]

 

The bank has instructed Wall Street law firm Chadbourne & Parke to pursue blogger Mike Morgan, warning him in a recent cease-and-desist letter that he may face legal action if he does not close down his website.

Florida-based Mr. Morgan began a blog entitled "Facts about Goldman Sachs" the web address for which is goldmansachs666.com just a few weeks ago.

In that time Mr. Morgan, a registered investment adviser, has added a number of posts to the site, including one entitled "Does Goldman Sachs run the world?" However, many of the posts relate to other Wall Street firms and issues.

According to Chadbourne & Parke's letter, dated April 8, the bank is rattled because the site "violates several of Goldman Sachs' intellectual property rights" and also "implies a relationship" with the bank itself.

Unsurprisingly for a man who has conjoined the bank's name with the Number of the Beast although he jokingly points out that 666 was also the S&P500's bear-market bottom Mr. Morgan is unlikely to go down without a fight. He claims he has followed all legal requirements to own and operate the website and that the header of the site clearly states that the content has not been approved by the bank.

On a special section of his blog entitled "Goldman Sachs vs. Mike Morgan" he predicts that the fight will probably end up in court.

"It's just another example of how a bully like Goldman Sachs tries to throw their weight around," he writes.

Speaking to The Daily Telegraph, Mr. Morgan explained how he went through a similar battle with US homebuilder Lennar a few years ago after he set up a website to collect information on what he alleged was shoddy workmanship in its homes. The pair eventually settled out of court.

"Since I went through this with Lennar, I've had advice from some of the best intellectual property lawyers, and I know exactly what I can and can't do. We're not going to back down from this," he promises.

Mr. Morgan adds that if Goldman manages to shut down his site, he has a number of other domain names registered.

• Speculation is mounting that Goldman Sachs is set to raise several billion dollars via a share sale, possibly next week, in order to pay down a $10bn (£6.8bn) US government loan, as revealed in The Sunday Telegraph last week.

 

The third decline in U.S. home prices in three years is driving a pickup in sales as bargain hunters rush to buy before mortgage rates rise, even as values may slump further.

Mounting foreclosures pushed the median price for a U.S. existing home to $158,800 in January, the lowest level since 2002, according to the National Association of Realtors. At the same time, sales climbed 22 percent from October, the biggest three-month gain since the end of a homebuyer tax credit. The rally began as mortgage rates started to rise from record lows in November and the economic expansion picked up speed. State attorneys general are pushing lenders to reduce loan balances and said they hope to reach a final settlement with banks over their mortgage-servicing and foreclosure practices within two months.

The states along with federal agencies submitted a 27-page settlement proposal last week to the country’s five largest mortgage servicers and aim to reach an agreement that leads to more loan modifications for homeowners having trouble making their payments, attorneys general said yesterday.

“The result we come to can have an impact on the housing market and the economy,” North Carolina Attorney General Roy Cooper told reporters at a meeting of attorneys general in Washington. “We don’t want uncertainty to linger very long.”

State attorneys general and federal agencies, including the Justice Department, the Treasury Department and the Consumer Financial Protection Bureau, submitted the proposal as a starting point for negotiating a settlement with the servicing industry, said Iowa Attorney General Tom Miller, who is helping to lead the talks with the banks.

Miller declined to comment about the role of banking regulators in the negotiations. Officials are talking with investors in mortgage-backed securities, Miller said. “The investors are particularly important in the modification process,” Miller said. “They own the loans they’re going to be modifying in certain ways including, for some of them, principal reduction.”

 

Corporate bond sales worldwide fell 28% in February, the second-biggest decline since Europe’s fiscal crisis roiled markets last May, as turmoil in North Africa and the Middle East drove away borrowers.  Issuers sold $252.7 billion of company notes last month, down from $352.5 billion in January.

U.S. state budget officials have recently become more optimistic about their revenue projections, but a new study found that they may want to re-think their views.  States actually have been making serious errors in estimating their revenue in tough economic times, a development that has major implications for policy makers trying to grapple with severe budget shortfalls.   That is the conclusion of a new report… by the Pew Center on the States and the Nelson A. Rockefeller Institute of Government, which said that half the states in the U.S. overestimated their revenue projections by at least 10.2% in fiscal 2009. That equated to an unexpected shortfall of almost $50 billion in personal income-tax, corporate income-tax and sales-tax revenue.

“Wisconsin Governor Scott Walker proposed cutting almost 22,000 state jobs over two years and requiring workers to contribute more to their health and retirement plans to close a $3.6 billion budget deficit.  The first-term Republican, whose plan to curb collective bargaining for public workers spurred protests across the U.S., would cut money for most state departments by 10% and lower public-education funds by more than $700 million.”

 

SHORT NOTES

 

Federal fraud: Healthy workers took disability. Investigation finds $25 billion misspent on payments from 2005 to 2009; thousands of federal workers received questionable checks

Federal disability about $170 billion per year is intended for those with medical conditions so severe they can't work at any job. Today, so many people claim to fit that definition, 17.9 million people are getting checks.

 

A Disability Epidemic Among a Railroad’s Retirees. During the workweek, it is not uncommon to find retired L.I.R.R. employees, sometimes dozens of them, golfing there. A few even walk the course. Yet this is not your typical retiree outing.

These golfers are considered disabled. At an age when most people still work, they get a pension and tens of thousands of dollars in annual disability payments a sum roughly equal to the base salary of their old jobs. Even the golf is free, courtesy of New York State taxpayers.

 

Lockhart: Recessionary oil spike could make Fed ease. If a further spike in oil prices appeared to be pushing the U.S. economy into recession the Federal Reserve would have to respond by easing monetary policy further, Atlanta Fed President Dennis Lockhart said on Monday.

"If it plays through the broader economy in a way that portends a recession, then I would probably take the position that would respond with some loosening or some easing," Lockhart said in response to question at a business economics conference

Lockhart is either an economic and financial idiot or he is ignorant of economic history.