China's Rare Earth Metal Monopoly

Nick Axline Mingwei Chen Economics 314 Dr. Young

China’s Rare Earth Metal Monopoly

Background In June 2010, China lowered its quotas on the export of rare earth metals by 72 percent, and in December of the same year, continued this policy by slicing them down further to around 35 percent. This series of moves by Beijing has raised serious questions across the globe, especially in Japan and the U.S., which are the largest importers of rare earth elements (REE). In 2010, Japan, the European Union, and the Americans decided to petition to the W.T.O., claiming that China was in violation of the rules set up by the trade organization. China had become a member of the W.T.O. in the year 2000, and thus was under its mandates. The Europeans, for one, called the quota “highly disappoint[ing],” with the W.T.O. warning that China’s reluctance to share its rare earth supplies broke global trade rules. However, Beijing still kept its rare earth supplies under tight fist and claimed that the new quota would satisfy the world market demand. It also claimed its quota was to protect the environment from the mining of the metals and to help growing domestic demand.

Introduction

What are the rare earth elements? They are a group of 17 metallic elements with similar properties and structures that are essential in the manufacturing of a diverse and expanding array of high-technology applications. The periodic table of the elements below shows the elements generally included among the rare earth elements. Lanthanum, for example, is used in hybrid cars’ batteries because they can be packed into a small space, but still deliver plenty of power—being “twice as efficient as the standard lead-acid car battery” (Koerth-Baker). Toyota, the largest car company not only in Japan but the world, has used this element in their Prius hybrid lines—8 percent of their total manufacturing. Rare earths are used in the creation of many high tech goods, which are essential to America’s and Japan’s economies. Erbium is used in the creation of lasers and fiber optic cables, as well as military equipment like night vision goggles and weapons. Many others contain special magnetic properties which make things like cell phones, hard drives, DVDs, CDs, wind turbines, and deep sea drills possible. Koerth-Baker quotes Daniel Cordier in her article in Popular Mechanics, with the mineral commodity specialist saying, “Rare earths have really unique chemical and physical properties that allow them to interact with other elements and get results that neither element could get on its own.”

Distribution around the world

Despite their name, rare earth elements are relatively common within the Earth’s crust, but because of their geochemical properties, they are not often found in economically exploitable concentrations. According to the table below, based on data from the respective countries, China has the largest amount of reserves in the world, sitting at around 37 percent. The U.S. constitutes the second largest segment, with 13 percent of the world’s reserves which are mainly distributed in California. The Mountain Pass mine in the Golden State produced rare earth elements until it closed down in 2002. In the U.S., REE deposits are found in Colorado, Florida, Georgia, Idaho, Illinois, Missouri, Nebraska, New Mexico, New York, and both Carolinas.

Sources :( U.S Geological Survey, 2011) History of rare earth production

Prior to the 1990s, the U.S. was the global leader in REE production. However, when China began its economic reform in 1978, which was headed by then president Deng Xiaoping, it began the process of expanding its rare earth industry. In 1992, Deng Xiaoping said “there is oil in the Middle east; there is rare earths in China.” The Chinese government encouraged the rare earth industry to grow rapidly by loaning to the mining corporations at a low rate. This was accomplished by using government-controlled banks and subsidizing mining corporations to export. Because most of the mining corporations are state-owned and supported by the government, they can get licenses easily, regardless of the environment destruction issues and inferior working conditions. China’s low commodity prices were also supported by cheap and plentiful labor.

The price of rare earth exports from China was much lower than the prices of producers in other countries, like in the Mountain Pass deposit in the U.S., which had to face increasing labor costs and environmental protections. With profits continuing to decline, the company which owned the mine decided to shut down in 2002. Since 2000, Chinese production has continued to increase dramatically, and by 2009, Chinese production increased 77 percent to 129,000 tons from 73,000 tons in 2000, while world production only increased 45 percent to about 132,000 tons from 91,000 tons in 2000. On the other hand, production from other countries decreased to about 3,000 tons in 2009. The volume of China’s rare earth output as a percentage of total world output increased to more than 95 percent in 2008, cornering the market and nearing a monopoly. This paved the way for the showdowns which the world is witnessing today.

Despite Chinese production expanded rapidly, China’s rare earth producers reportedly have struggled to maintain profitability. Throughout the 1990s and 2000s, the government and rare earth producers had met and discussed ways to control production and exports as a means of conserving the country’s mineral resources and protecting the environment, but nevertheless, competition among local governments and enterprises resulted in sustained high levels of production. Local governments depended upon rare earth producers to provide employment and revenue for local economic development and did not always follow the national government’s guidelines on rare earths. As a result, the country’s actual output of rare earth continued to exceed the government’s production target (China State Council, 2006).

Because of these continued issues, China’s main goal in recent years was to consolidate the various companies so that they could be more tightly controlled. According to the record, the number of rare earth producers fell from 59 in 2006 to 31 in 2011. Most of the REE producers are state-owned, so central and local government have more power to regulate the production and supervise the working condition and environmental protection. Second, the Chinese government has encouraged the export of high-value downstream products and discouraged the export of raw material. The Chinese enterprises do not have the high technology to refine the material, so most of exports are raw material which are shipped to Japan and are refined by Japanese companies, and then resold to China. Beijing has encouraged the firms that have the technology to refine the raw material in Chinese factories, which will not only enforce the application in China, but also bring up the employment rate and the national income. Third, the China cut quota to 30,000 tons per year in 2010 and 2011 from 5000 tons in 2009.

Table.1 China's rare-earth production, consumption, and export quotas for 2000 through 2011. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Production MIIT 119,500 110,700 89,200 N/A Quota MLR 55,000 N/A N/A N/A N/A N/A 86,620 87,020 90,180 87,620 89,200 N/A Prodction (est.) 73,000 81,000 88,000 92,000 98,000 119,000 133,000 12,000 125,000 129,000 12,000 N/A Consumption (est.) 19,000 20,000 22,000 30,000 34,000 52,000 63,000 73,000 67,700 73,000 77,000 N/A Export quota Domestic producers and traders 47,000 45,000 N/A 40,000 45,000 48,010 45,000 43,574 34,156 31,310 22,512 14,446   Sino-foreign joint ventures N/A N/A N/A N/A N/A 17,570 16,070 16,069 15,834 16,845 7,746 15,738 Sources: China Ministry of Commerce (2006, 2008a, b, 2009, 2010a, b, c) According to the table above, between the 2005 and 2007, Beijing allocated a quota of 60,000 tons; however, they began to cut the quota after 2007. Until 2010 the quota was 30,258 tons, which was a reduction of 39.5 percent from 2009. In 2011, the quota was 30,184, reduced by 74 tons (0.2 percent) from 2010. Last year, the world’s rare earth market was worth about $2 billion. China currently controls 95 percent of the world’s rare earths, producing about 120,000 tons in 2010. Based on the international economics theory, the production of rare earths will be changed in the short run, so the supply curve is inelastic. When China exports a large amount of rare earth, it causes the price to fall, but after Beijing cut the quota and because of the inability of competitors to raise the production immediately, the price of the rare earth metal in the international market will rise rapidly in the short run. When China lowered the quota of rare earth, the price of rare earth skyrocketed in 2010 and the first two quarters in 2010 because of their control of the supply. According to the table above, the FOB China price of REO in 2009 was 10.23 per kilogram, and increased to 31.35. In Q2 2011, the price went up to 173.20 and increased 16 times from 2009. The value of export of rare earth from China increased by 930 percent in the first half of year 2011, mainly because the price went up so rapidly.

Table 2: FOB China Prices Rare Earth Oxide 2008 2009 2010 Q2 2011 Q3 2011 28/11/11 Lanthanum Oxide 8.71 4.88 22.40 135.02 117.68 65.00 Cerium Oxide 4.56 3.88 21.60 138.29 118.65 55.00 Neodymium Oxide 31.90 19.12 49.50 256.15 338.85 240.00 Praseodymium Oxide 29.48 18.03 48.00 220.08 244.73 210.00 Samarium Oxide 5.20 3.40 14.40 125.60 129.45 90.00 Dysprosium Oxide 118.49 115.67 231.60 921.20 2262.31 1970.00 Europium Oxide 481.92 492.92 559.80 1830.00 4900.00 3800.00 Teribium Oxide 720.77 361.67 557.80 1659.20 3761.54 2820.00 Av. Mt Weld Composition 14.87 10.32 31.35 173.20 193.21 122.39 Source: Metal Pages Who gains and who loses? The Chinese government will gain from the quota if the prices continue to remain high. Beijing has placed a tariff on exports which is a percentage of the price. Because of this, if the price goes up so does the tariff. In recent years, the country has been trying to compete in the international market. By forcing foreign firms to work with state-controlled ones because of the freedom it gives from quotas, China can hope to learn and mimic some of these advanced technologies, and having such ready access to the deposits also allows China’s goods to become more attractive to foreigners because they have “privileged access” to green technology. Politically, China may be given more leverage in international disputes if they can halt the trade of REE to the offending country. This actually happened in September, 2010, when China ceased the sale of REE to Japan during the boating dispute in the Pacific Ocean where a Chinese man was detained. On top of these reasons, there are also the stated government benefits of reducing harm to the environment and helping domestic demand.

However, private Chinese companies will lose and many have already been driven out of the industry in the past three years because of newly required licenses which will be discussed later in the paper. Producers of rare earth in other countries can expect to gain from continuing high prices though. Because of the shortage of rare earth on the market and the inflated price for which they are selling, mining for REE will become increasingly attractive as long as the additional product cost is less than the marginal revenue. That is why the price of stock for Molycorp has increased three times over in 2010 and ‘11. Like usual, consumers lose. As the prices of the REE go up, the cost of products which rely on REE will rise as well, and the consumer surplus will decrease.

What will the impact be on the United States? The value of refined rare earth imported by the United States in 2010 was $161 million, an increase from $113 million imported in 2009. Is that a big number? Let us look at some numbers:

· In 2010, the total imported REE by the United States was $2,337,604 million. · In 2010, the total imported REE by the United States from China was $364,943.9 million. · In 2010, the total imported crude oil by the United States was $252,161 million. (U.S. Census Bureau, 2011) So, in 2010, the value of rare earth imported by the United States was 0.0068 percent of total imports, 0.041 percent of the imports from China, and 0.064 percent of the imports of crude oil. The increased price of rare earths recently would not have the same impact as the increased price of oil by the OPAC in ‘70s and ‘80s because the value of the industry is trivial compared to the value of the oil industry. Therefore, the increased price of rare earth does not have much impact on the imports of the United States and the whole of American society.

Environmental concerns and substitutes

The mining of rare earth metals has been destructive on China’s land and people. Keith Bradsher reported in the New York Times of the havoc it has waged on the environment. In one example of the small village of Guyan, the devastation the mining caused on the local community is indeed terrible. Where bamboo, banana trees, and rice once grew, now there is only red clay dead zones which have to be washed away by the workers using acid—acid that pollutes rice paddies, fish farms, and water supplies after rain storms. REE deposits also often contain radioactive material, like uranium and thorium, which have to be separated from the other metal to be used. This is obviously dangerous to the people involved, both the mining employees but also the surrounding farmers and villagers. In Southern China, miners often report growing ill, with the ‘heavier’ rare earths being the hardest on the local environment. On top of the ill effects on the country’s ecological well-being, many of the deposits are run illegally by dangerous Chinese gangs from the cities. After the ore is brought to the surface it is sold to traders, who then bring it to processing centers, leaving the origin anonymous.

All of this is somewhat ironic given what much of the metal is used for—wind turbines and other ‘green’ technologies. One wonders of the hypocrisy of elitists in Western countries who preach of their ‘green’ cars, and wind and solar energy. Often the materials which go into these products are obtained in ways that are a net negative on the Earth’s environment. As long as they cannot see the ‘deadly’ carbon fumes leaving their exhaust pipes, they can live in ignorance of the activities going on in countries like China. However, Pugel’s International Economics reminds the reader that often the cost associated with pollution regulation is not enough to force companies to move to countries with more lax laws—indeed, other factors such as “comparative cost advantage, transport costs, and external scale economies, are usually more important” (Pugel 284). There is evidence also to support that the Chinese are increasingly becoming more aware of their local environment, with Beijing claiming to the W.T.O. that the rationing of REE is to do with the ecological cost to the country.

Despite the name, most rare earth metals are not hard to find, but the environmental price of bringing them from the earth has led many developed economies to export the pollution elsewhere. However, with the threat of China’s continued monopoly of the trade and rising prices at the beginning of 2011, many REE mines around the world are looking at reopening, with developers in Canada, Greenland, South Africa, the U.S., and Australia examining the possibility. The largest mine in America is located in San Bernardino County, California, and has a history of being the biggest producer of REE in the world until 1984. Mountain Pass, the name of the deposit, has reserves of over 30,000,000 tons of ore. This supply would be able to meet current U.S. demand for at least 150 years but take several years to start up, with some economists warning of a time span of up to 5 to 10 years. The deposit is owned by the American corporation, Molycorp. In November 2011, Molycorp’s reported record sales of $138.1 million, a 39 percent increase over the previous quarter in 2011. Sumitomo and Mitsubishi Corp., two Japanese firms who have both shown interest in diversifying away from Chinese ore, signed agreements in late 2010 to be supplied by the Mountain Pass deposit and the American firm, W.R. Grace & Co. (a catalyst manufacturer) has also decided to participate. This mine can only produce “light” rare metals, lanthanum and samarium, but if other known U.S. sights opened up which contain “hard” deposits, America would be able to self supply completely.

Another mine in Australia owned by the Lynas Corporation is also rearing to relaunch and a massive deposit was recently discovered by Japan in a Pacific sea bed; however, most other companies lack the knowledge or the means to do so. This can give China the advantage in the short run, but not in the long run because Beijing will lose control of the prices. This is similar to ‘dumping’, where one country will unload products with cheap prices on another to drive out competition, and then raise the prices later. Dumping is hard to do because once the prices are raised, other companies will move in and take back market share. This is what is going on now—China will not be able to hold onto its monopoly if others start producing and selling for cheaper prices.

Foreign mining competition is not the only threat China might have if it continues its predatory pricing—companies, both in the West and Japan, have been trying to find alternatives to rare earth metals or, at the very least, use less of them in their manufactured, high-tech goods. In 2009, the U.S. Congress ordered the Department of Defense to review the military’s dependence on the foreign REE and yet another bill introduced called for the stockpiling of the metals for national security if China started halting the trade entirely, which it was threatening to do in 2012. Toyota of Japan and Siemens of Germany have also been working to reduce their purchases of the metals, as are many other companies around the world. Other options presented to countries that use REE extensively include recycling rare earth metals from landfills and dumps. High tech items, such as motors, televisions and cell phones, could be used in new gadgets if there is enough salvage value left in the materials, and there has been other research indicating that pyrate (or “fool’s gold”) may be “able to replace Rare Earths in many applications” (Blankenhorn).

The present and future At the end of 2011, the price of rare earth metals dropped at an average of 20 percent, with Chinese exports of lanthanum declining 60.4 percent and cerium 92.3 percent. This was a result of falling demand because of the higher prices. China reacted by consolidating REE companies across the nation, cutting mining entirely in mid-October, and devising a system of ‘special invoices’ to more tightly regulate the industry and weed out illegal businesses. The new ‘invoices’ will require producers to have special permits to sell their material to the market. However, this action may actually cause the price to drop even further because some smaller firms may decide to exit the market, liquidating their reserves and flushing the marketplace with more metals. Because of this, buyers may halt purchases because of anticipated lower future prices, creating a multiplier effect—the price will continue to fall even quicker. With threats like these, China’s position is deteriorating. If Beijing is going to take advantage of their monopoly they will have to move quickly.

For an investor, volatile commodity markets can be a great area to place money because there is much to be made both on the upside and downside. In the short run, we predict that REE prices will become increasingly volatile yet show a general upward trend. This is in line with how other commodities, such as gold, copper, and oil, are currently performing. In the long run, however, prices may be driven down to sustainable levels, preventing a bubble from bursting. This could be a long time in the future, so there is still plenty of money to be made. In 10 years, China will have lost complete control of their monopoly with the threat of substitutes like pyrate, recycling, and new mines killing it by a thousand cuts. In the interim, they may use their control to leverage their position against America if there is an economic or militaristic showdown. China is increasingly allying itself with regimes like Iran and Russia, and tension is increasing in the South China Sea with a heavier American presence and countries like Vietnam, Thailand, and the Philippines growing increasingly anxious with China’s growing prominence.

Citations:

Blankenhorn, Dana. "Don't Worry About Rare Earths." Renewable Energy World. 19 January 2011. Web. 4 Dec. 2011. Bradsher, Keith. "Challenging China in Rare Earth Mining." The New York Times. 21 April 2010. Web. 4 Dec. 2011. Bradsher, Keith. "Earth-Friendly Elements, Mined Destructively." The New York Times. 25 December 2009. Web. 4 Dec. 2011. China State Council, 2006, Instruction for mineral resource development: Beijing, China, China Koerth-Baker, Maggie. "4 Rare Earth Elements That Will Only Get More Important." Popular Mechanics. Web. 4 Dec. 2011. Koyano, Taro. "Firms eye U.S. rare earths / Sumitomo, Mitsubishi link with Molycorp to diversify from China." Daily Yomiuri Online. 20 December 2010. Web. 4 Dec. 2011. "Leading article: An elemental challenge for China and the world." The Independent. 2 January 2010. Web. 4 Dec. 2011. Lee, John. "Beijing's Motives Behind Rare-Earth Metals." Forbes. 3 January 2011. Web. 4 Dec. 2011. Lifton, Jack. "The Battle Over Rare Earth Metals." Journal of Energy Security. 12 January 2010. Web. 4 Dec. 2011. Martina, Michael. "China to control rare earth extraction, pollution." Reuters. 7 January 2011. Web. 4 Dec. 2011. Milmo, Cahal. "Concern as China clamps down on rare earth exports." The Independent. 2 January 2010. Web. 4 Dec. 2011. "Molycorp In A Rare Earth Bubble That Is Quickly Deflating." Seeking Alpha. 22 November 2011. Web. 4 Dec. 2011. Montgomery, Michael. "China Stalls Rare Earth Production to Curb Falling Prices." Rare Earth Investing News. 7 November 2011. Web. 4 Dec. 2011. Pugel, Thomas A. International Economics Fourteenth Edition. New York: McGraw-Hill Irwin, 2009. "Rare-earth metals." Think Global Green. Web. 4 Dec. 2011. Russell, Karl. "Many Want Rare Earths, but Few Are Mining Them." The New York Times. 6 February 2011. Web. 4 Dec. 2011. State Council Circular 108, December 31, 5 p. (In Chinese.) U.S. Census Bureau, 2011, U.S. International trade in goods and services annual revision for 2010 U.S Geological Survey, January 2011, Mineral commodity summaries

A return to sanity -- the markets and the feminine

Since I was young, I have loved cities. The character built up on years of life, of blood, sweat, and tears. Little alleys and tucked in areas that only certain people can access. They are mazes--great big mazes constructed over years and from different minds. The city is like a bazaar, or even a social computer structure like Linux. They are put together, made beautiful, because of the different architects who decided to place their mark on them. Eric Raymond, in his essay "The Cathedral and the Bazaar", argued this same 'open-source' system could be applied to society at large. I think it already does inside the limits of the city. Here the soil is plotted by the physical infrastructure, property laws, and zoning and other regulations facilitated by the federal and local government, but is seeded and nurtured by private institutions. Later in this essay, I will use this framework to attempt to depict a deregulated system that is aided by the government and not hurt by it as is often the case in modern city management.

In my mind's eye I am constructing roads. They line the earth like a map and sink into the dirt. The physical land is ready to be drawn upon by man. The industrial sector starts to see promise in its easy-to-use layout. Workers quickly follow and the business worlds bustles, ready to construct building atop of building geared toward finance and economics. Each individual unit is ready to use his energy to improve the structure of the city. To lay a road here or build a bench there. Alleyways develop, gardens are planted atop of roofs, and a banker orders a fountain to be constructed in front of his building. This is the decentralized world which could be guaranteed through proper institutions. The government, instead of intruding, can actually facilitate private development by creating the proper infrastructure for its nourishment. However, for something like this to be realized, one must first understand the wildness of the market and the collective unconscious which drives it. I wish to showcase this tension for the reader and the danger man faces when he attempts to interfere with the actual mechanisms of the economy.

But first I want to set up a mythological set of images. Cities, as I have experienced, are where the doers do. The country, on the other hand, is where the passive stay passive. Nothing changes in Montana, but things change in the city all the time. They transform with each foot pushing into mud or a dime thrown in a bum's cup. In the southern district, people chuckle dismissively in a comedy club, a woman asks a man for a smoke outside a 30 story building, and a drunk pees on a red brick wall as a train passes by. Somewhere in the north, an ill college student writes his passions on the blank pages of his journal, on the floor under him two people make love, and under them is an older woman watching Starz. Nothing interests her tonight so she decides to go to bed early. Down below, far below, in an alley with a thrown over garbage can, someone is getting mugged. A man of great wisdom or terrible pride can render a city raw with the bite of his words or the tip of his pen. Revolutions can happen in the country, but they are always a result of a person inspired by vitriolic ideas from the urban world.

In Montana, the entanglement of branches, leaves, and bark with the high peaks in the West and the empty plains of the East have a sort of order to them as well, but what they lack is the energy and spirit of man's will. His desire to transform perceived chaos into order (blocks, ovals, window panes, side walks, cement). Both are necessary. Both realms of delight. But a city is where a man goes to construct his ego; the wilderness the place to dissolve it. It reminds him that nature is all-consuming, endless, and that man's world is a strict illusion. The city grows from the gifts of the earth and orders it to understand it, the earth is the foundation of man's world--they complete each other and are the masculine and feminine energies of the cosmos.

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It is my belief that modern Western man has blinded himself. He has focused his attention (as is the left brain's inclination) to the ego at the expense of the subconscious. This blindness has translated into Keynesian economics, and ultimately man's belief that he is the Earth's master and it his servant. Keynesian economics is, of course, predicated on the belief that the government can positively affect the market by enacting certain policies. It has also led to the establishment of fixing interest rates at near zero, the printing of dangerous amounts of fiat money, and the corruption of the private banking system. The Federal Reserve, created in 1913 by Woodrow Wilson with the Federal Reserve Act, is a socialist institution at the heart of America's 'free market'. This manipulation has only been amplified further when in 1971 Richard Nixon abolished the last vestiges of the gold standard which were established with the Bretton Woods monetary system in 1944. After this, the American dollar was no longer tied to a commodity. It was primed for manipulation by the private bankers in charge of the Federal Reserve. The market, which was uncontrollable by a single man's will, was now under the purview of the men who did seek to control it. This system led to the growth of the military industrial complex, pork barrel spending, and overall, the average American's enslavement to debt. If the creation of wealth meant nothing but the pressing of a button on a computer screen, then America, as long as her currency was still respected, could do anything she pleased. And she did.

The markets themselves are not a masculine force; in fact, they are quite feminine. They mimic nature in that they are often cyclical, based on the seasons, and even the cycles of the day. The macro-economy is the collective unconscious of a greater body of individuals, just like 'nature' is the collective unconscious of the Earth itself. It represents the animal, plant, fungi, virus, and bacteria kingdoms, the deeps of the oceans and highs of the mountains. The economy is likewise separated into various kingdoms, industrial, financial, high-tech, etc. and their various linkages. And just like nature, there are individuals in the market's systems--huge organisms like multinational corporations and small one-cell units like people themselves. Man often puts an emphasis on bigger creatures, thus when a large firm fails, he feels the need to save it and the individual cells which make it up. This is often labeled 'progressive' and 'compassionate'. What it is is unnatural. Even elephants and tigers should be allowed to die if they are found wanting. It's called 'the survival of the fittest', and when this is not allowed to happen, the overall economy will become less able to provide utility to the masses and weather more severe storms in the future. It is only when man tries to direct the market's, nature's actions for his own need do they become corrupted by man's will. This is not to say that saving a good business (or animal) is an evil, especially if it was killed by something alien, like the government's will or a madman with a shotgun. However, if it dies because it can no longer compete, it should be allowed to perish. Just like nature, a new company will spring up to replace it, a better, more fit company. That is, if nature/the markets are working properly, which today, neither are.

This was a result of man's ego--his need to control nature for his own end. And it was and is arrogance.

It gave him a drive to control the world around him, to live completely separated from the danger that nature (the market) represents. There is nothing in science that detracts from the majesty of the universe. In fact, it enhances it. However, this knowledge (logos) also gives the holder a new power to weild--it makes him start to believe that he may be different than the rest of the cosmos, and this leads to a great deal of hopelessness on one end, or a sense of superiority and entitlement on the other. Nature is transformed into a mere resource that can be used, not something that can be worked with as an equal. In the history of humanity, this is the turning of the Neolithic to the Axial age. Goddess cultures began to waste away and give way to sky-god dominated ones. We can see a graphic representation of this in the Babylonian tale of the slaying of Tiamat by the new god, Marduk. This change seems to coincide with the invention of the alphabet and the growth of cities. With the collapse of female worship, women began to be treated as property, people's ownership of slaves, and the mistreatment of nature. Man's sense of self, something that is quite different in oral cultures, set him on a path of hierarchy, boxing, kings, and feudalism--and the creation of the great abstract god in the sky who denied the existence of the female half of Himself completely and could not be depicted in pictures, but only writing.

This is the work of the left brain, Saturn, who is the mythological representation of time and death, and to the Romans, civilization itself! However, it also leaves out the female aspect of the godhead, the Mother, she who represents eternity, wildness, and the invisible dimensions of our lives--the subconscious as opposed to the conscious. There is also a completeness to her that the masculine ego lacks. She is everything, not just the 'nouns' but also the 'verbs'. Saturn, on the other hand, is pure will. He is the Titan of individuality, boxing, of beginnings and endings. His desire is to control the Mother to his own ends. In other words, he wants to be free of her wildness, not having to worry about her mood-swings. The story I want to set up is this: Saturn's desire, the great material force in the universe, is not only to control the market, but to eventually eliminate it completely. In this case the great Titan is represented by the will of government to control a wild economy. This 'wild economy' is the Mother--a great, holistic force that is susceptable to the whims of the collective unconscious.

It is, indeed, a fallacy to assume that the goal of the market is continual expansion. It is analogous to saying that the ultimate goal of evolution is continual expansion from bacteria to higher creatures, to humans, and then to whatever comes after. It only gains this significance when man starts to form a framework of memories and desires, constructing a story from the patchwork. This is the masculine ego trying to take control of something it does not completely understand. A single person does this constantly. We form goals, a narrative, from our memories and hopes. This happened because this happened because this happened. In fact, studies have shown that much of our happiness depends on the forming of these false narratives. Viktor Frankl discovered this inside the horror of a concentration camp. And Maury Kelly concludes in a recent article for the Atlantic:

As studies have shown, depressives tend to have more realistic—and less inflated—perceptions of their importance, abilities, and power in the world than others. So those of us who benefit from therapy may like it in large part because it helps us to do what others can do more naturally: to see ourselves as heroes; to write (and re-write) the stories of our lives in ways that cast us in the best possible light; to believe that we have grown from helpless orphans or outcasts to warriors in control of our fate.

In other words, we can accept a bad event happening or our own egregious actions if it was the inevitable stepping stone to the person we needed to become. The error occurs when we start to associate too much with our 'roles'--when we forget that they are just drops which fell from the subconscious like rain from a cloud. There are, of course, many more where that came from.

Socialist Liberals often have it wrong in this regard. They argue for a government that is compassionate and will save everything, but at the same time ideologically chip away at the masculine half of nature. This makes no sense. They deny what makes the feminine special and instead attack the masculine with masculine tactics. Women are of the base. They nourish the soil, the roots, so the the masculine has a solid foundation to build from. Her basic desire is not to hunt, but to provide elements of a successful endeavor, not actually taking part in it. Many feminists may argue that this is somehow a lesser function, but it is important to remember that during Paleolithic times, the woman's role as mother, gatherer, and home-keeper was equally as important as the man's role as hunter. The man's quick spurt of energy and then instant success or failure was more heroic; however, if he did fail, then the clan would have to rely on the women's gathering abilities. She provided the fail-safe, the jumping pad which men felt comfortable enough to leap from.

Men and women during these times were on equal footing; however as civilization progressed and people moved into cities, her function was deminished. It is one of the great achievements of our age that her power is returning. It is the markets, a great equalizer, which will eventually return her to her status. Statistics support this fact. Feminists often bring up the pay disparity, but any sane individual can see these numbers are slanted. If it were true, companies would hire many more women to take advantage of their less-than-equal pay. This decrepancy, in the first place, is often a result of women leaving to take care of children and not advancing as far as men would in a similar period. It is also true that women are often attracted to careers that are not as high-paying as a man's. Should this be seen as unequal? I say no. Men often risk more in the jobs they choose and thus often receive higher pay. This is the essence of the hunt, of striking out on a quest and completing it no matter the risks. It is also supported by various financial equations that show that higher risk results in a higher value in the denominator, lowering the attractiveness of the investment. It simply makes sense. Many women feel disillusioned because they have lost the sense of the feminine inside themselves in a man's world. However, with the advent of the internet, which is highly feminine in the way it works, the continued interdependence of the world economy based on the market, and continued linkages via IGOs and NGOs, a return to equality is not only coming, it is almost here, at least in the Western world. However, as I will try to show, the goal of life is not continual growth as put forth by the left brain; nor is it the continual change acknowledged by the right. It is a balance between the two.

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The markets have 'gone wrong.' There is no denying that fact; however, some believe that it is the markets themselves that are inherently evil and not the system of government attempting to control them. When I say 'system', I am talking about the revolving door of the private and public sector, the gerrymandering of districts, the stink of lobbyists in Congress, the secret mechanisms of control, of private vetting, of criminal activities perpetrated by government employees, the nascent police state, the military-industrial complex, and the horror of self-inflicted terrorism on our home soil to justify it. Both parties, no matter their campaign promises, inflate the federal government's power when they are placed in office. This should reveal the duplicitous nature of the two-party system. It is a red herring to keep us distracted from the real corruption and evil. Enslaved with debt and overwhelmed with pop culture, sports' statistics, and social networks, people, in general, do not have enough energy to enlighten themselves on important things like the national debt, bills passing through Congress, or the drones filling the skies. They rely on the people in government to do what's right, and this is a dangerous assumption.

What we all must realize is that to attempt to control the will of the market is like trying to control the will of a river by damming it, siphoning off water for irrigation, or fishing from her waterways. Heidegger talked about a similar concept when it came to technology--on one end, we can see nature (or 'the market') as a resource that can be owned or, on the other, as something that cannot be owned but instead, worked with. Picture a boat atop the waves. It is still a technology, but it is one that doesn't destroy the resource. Yes, things like dams, irrigation, and fishing can be done sustainably; however, when put under the control of government, this result is unlikely. People and markets, for the most part, are rational. It is not in their best interest to destroy their livelihood (especially if they own it). And even when man is irrational, what is wrong with that? Wasn't man born to be irrational if he wants? Shouldn't the markets then reflect his irrationality? In theory, one person should not be able to affect the entire system if capitalism isn't corrupted anyway. However, with the engorgement of government, this will always be the case.

My argument for the restriction of government is not that it is inherently evil, but that it is so easily corruptible. Yes, it is nice to imagine a perfect utopia where the government is controlled by people who are selfless and intelligent, but this can never be the case if humans still act like humans. Unless you are willing to fundamentally alter mankind to extirpate his natural desires for power, sex, and wealth (and believe me, some people really are), then a perfect benevolent system of government can never be. The alternative to father government, some people wrongly believe, is America's capitalism gone wrong--the conglomeration of banking, MNC's, and government into something of a corporotacracy. But again, this system is one where government is still too big. By planting seeds in the market's soil and burning down an overgrown, dying forest, there can possible be real 'green shoots.' This, however, requires a recognition of life and death. People fear death. They fear change. To allow something to die is against the ego's natural tendency. The subconscious, on the other hand, has an innate knowledge that everything will eventually perish, but the parts that make it up never will. There is only change but never true destruction. In the West, death is hidden away in a hospital bed. It is a terrible sad event and people only mourn. We can be controlled by our fear of death, you see, and we often are by those in control. After we realize that death is simply another illusion we can progress into a healthier and saner way of seeing of the world.

The government's role should not be a masculine one. It should, instead, upkeep a feminine one. In other words, a structure which the 'hunt' can leap from. The soil from which his seeds can grow and reach for the sky. How can it achieve this goal? (1) By providing the proper laws which assure the rights to property, due process, and free speech. (2) Guarantee a certain level of autonomy--the right to be able to own guns, alcohol, and drugs. (3) The right to equality not based on aptitude but on guarantees of being fairly treated no matter age, race, sex, or sexual orientation. (4) A pledge of transparency, and a law on the book that will oust the government official if he does not perform par standard. (5) I call for the end of the private Federal Reserve banking system, for fiat currency, and the end of impeding other country's right to self-determination except in some cases such as genocide and/or war crimes like torture. (6) As well as make illegal the taking of private money from large MNCs and banks once elected to a position in government unless voted on by his constituates. (7) A police force and army should be maintained to enforce the laws. (8) I believe it is better for the government to have a monopoly on certain sections of the physical infrastructure like roads and energy. This is proven in easy to understand graphs which economists can produce. Issues like education, health care, and insurance can be solved by allowing the market to out compete the government. Here I call for deregulation--people will go to the best and the best will prosper, guaranteed. (9) And lastly, the right to fail. The stakeholders have a right to take over and do as they see fit once bankruptcy is declared. This gives the potential for a new, better business to birth from the ashes.

Of course, I have a certain love for research funding and higher education. I think, at least, this sort of thing invests in the future of the country's well being and should continue if it is what the people want the government to do with their tax money. For my part, I think this would be a much better investment than pointless wars and saving businesses which do not need saving. As far as the tax system goes, I see a fixed tax of something like 10% being the most fair. Some argue falsely that taxing the rich at a higher rate is 'fairer', if that is a word; however, statistically, richer people save more so this money would end up in new, more advantageous investments from the banks anyway. This seems right and a more progressive stance on the future of the country's economy. Once emotions become involved in the government's decisions, it results in lame attempts to help which often result in the complete opposite outcome. The government, in turn, should be the boat on the river helping us coast on the waters of the market, not the dam, irrigater, or fisher. Remember, the market is a feminine force and should boost not only the elephants but the worms when it is working properly.

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I bring you this last section in a moment of clarity. Looking back at my progression over the past two semesters of college, I have learned of the limits of one's love of another. This love can only extend as far as the person loving loves himself. With this in mind, I will speak of a theoretical hero who will save us from our sins. It will be he who loves himself as much as he loves mankind. This is not to suggest that this theoretical person is full of himself or arrogant; instead, it implies someone with the conviction to extend his love as far as it will go. Compassionate love that does not interfere with another's life, but enhances it. It coasts on the waves of his waters, not altering or impeding his flow. This man will come from a place not from the desire for his own gains, but his love for all mankind.

I often speak of the meaninglessness of politics as a cynical college senior; however, if someone could emerge from the masses not wishing for material wealth, fame, or sexual liaisons, I could stand behind him fully, willing to give myself over for his cause of a better world. A world not predicated on a Utopian paradise, but one of respect, compassion, and most of all love and a knowing that God's love does not come from his desire to control our every action and thought, but a God who respects our freewill to make our own choices. Did God not know we would be thrust from Paradise always longing to return? If He is all that they say He is, then the answer is yes!

Understand what I am saying: I want an end to the counterproductive cynicism towards politics and 'the system', and instead, a call to rise above it! I long for an age that respects the individual as much as the community, a true balance between the masculine and feminine aspects of our inner selves. I also say this knowing that ultimately the respect of the community comes from the respect of the individual. By respecting the 'negative' rights of the individual, there can be true growth. The grand buildings will rise, spinning their webs, layer after layer, making all of us wealthy again. Making all of us respect ourselves again--a true love that comes from inner light not from thankless help.

Operation Twist

On September 21st, 2011, Operation Twist was set in motion by the Federal Reserve. This measure, with precedents as early as 1961, was announced at the conclusion of a Federal Open Market Committee Meeting and, ostensibly, is one of the few rounds left in the once seemingly endless magazine of the fed pistol. With world markets standing precariously close to a metaphorical abyss, politics are beginning to play a larger role, even on an institution which is supposed to be an independent body. The bum that is the economy is getting closer and closer, but no matter how many bullets are shot into his raggedy-cloth covered chest, he will not relent. He has an evil grimace, a terrible redness in his eyes, and poor Bernanke looks on helpless, holding the firearm near his chest with the world looking on. He knows there is little more he can do, but to spare his own anxiety, he shoots again, knowing what the outcome will be. This is Operation Twist, the next stage of the Fed’s ongoing policy to stop the Apocalypse. The American economy truly is in dire straits. Unemployment stood at 9.1 percent in August 2011; however, real numbers actually could put it as high as 16 percent, and manufacturing in the U.S., measured by the P.M.I., is slowing down or even declining. Across America people are suffering and losing their jobs—jobs which will never come back. Is it no wonder the government has so much pressure put on it to act? People are naive, believing that the feds can have any “real” impact on the economy. The only thing they can do is manipulate, creating fiat currency, shifting wealth, and using propaganda. These are not actual things, they are puppet shows put on to distract and distort, but they have to do something. They have to act to get reelected and earn their keep with the lobbyists. America, the beautiful, home to the corporatocracy—the interweaving of government, banks, and multinational corporations. With external pressures like these, no wonder Bernanke is sweating like a clown at a cannibal convention.

A Wall Street Journal Article, “The Limits of Central Bank Policy” by Alen Mattich, claims the Fed’s recent move to try an ease the panic has caused equity markets to tumble. Mattich postulates that investors could be merely disappointed with the amount the Fed is willing to do and frustrated that the reserve bank is not being more aggressive in purchasing Treasury Bonds. However, it could be something more: investors may be losing faith in the financial institutions themselves and giving into the belief that “central banks are at the limits of [their] policy” (Mattich). Might this be the return of real economics and not hyper-finance on steroids? Mattich seems to suggest so. Real assets prices cannot be trusted in the market because they are manipulated by a private bank with no oversight—whether this is a good thing or not. Mattich ends the article by saying, “governments have to unleash the harshest ravages of capitalism. [...] At the end of it, people will feel less well off than they did at the height of the boom, especially the very rich who have benefited to an unconscionable degree from both the debt bubble and from the rescue afterwards. But they will feel less hopeless, more inclined to invest in their businesses and their futures and thus more able to lift themselves out of this financial disaster.” Is the Fed continuing a policy which will lead to more misery in the long run or is it maintaining morally justifiable measures in the face of economic Armageddon?

But first, what is Operation Twist? It is a suggested alternative to quantitative easing in which the Fed sells shorter-term United States debt for longer-term bonds. Its goal is to flatten their yield curves, lowering them further than they already are. Originally employed in 1961 by President Kennedy and named after a dance craze at the time, it was long thought of as having disappointing results. However, according to an Economist article titled “Twisted Thinking”, some economists are starting to question its failure. Eric Swanson, who works at the Fed Bank in San Francisco, says that the old studies did not “properly isolate” the Operation Twist influences, and that it may have had an overall positive effect on the macro-economy. With this in mind, the Fed announced on September 21st, 2011 that it was going to enlist a similar measure. The plan, according to the Fed website, is “to sell $400 billion of shorter-term Treasury securities by the end of June 2012 and use the proceeds to buy longer-term Treasury securities. This will extend the average maturity of the securities in the Federal Reserve’s portfolio” (Federalreserve.gov). This action, the Fed says, will reduce the amount of long-term treasuries and put “downward pressure” on their and other close substitute’s interest rates.

Operation Twist has several attractive features. First, it does not require printing money, which is a good thing for a country with a dangerously high inflation rate (when things like food and gasoline prices are taken into account), and second, the Fed does not have to add to its ever growing balance sheet. Lastly, and maybe most importantly, it gives the appearance that the government is trying to do something in the face of an increasingly irritated and unemployed populace who mistrust the bankers (Nasad). By pushing interest rates lower, ‘Twist’ should encourage spending rather than saving, and hopefully American citizens will want to borrow more. Therefore, the Fed hopes this stimulus will cause upward momentum in mortgage loans and home ownership. However, as seen in quantitative easing, actions like these have had little effect on things like unemployment and the real estate industry in the past. On top of previous statistics, respected economists are echoing the same line: Operation Twist will have little effect on the macro-economy. A Wall Street Journal article titled “Operation Twist: A Solution in Search of a Problem” by Mark Gongloff quotes Joel L. Naroff, a major economic advisor, as saying:

Clearly, the emphasis on driving down longer term rates is an attempt to get mortgage borrowing and capital spending going a lot faster. But businesses are flush with cash already and it isn’t rates that are stopping them from hiring or investing more. Companies are just uncertain about the direction of the economy and demand is not growing fast enough to require greater job growth. Households are reducing their debt, not adding to it, and as we saw from today’s National Association of Realtors existing home sales report, failed contracts are growing. That is more an issue of appraisals and cautious lending practices than rate levels.

Naroff suggests that the main problem is not that the interest rates are too high or that the economy is even fundamentally unsound. The real issue is a lack of consumer and producer confidence. The environment simply does not feel safe to spend, to buy a new home, a new car, expand a business, or go on a vacation to New York City. No matter how many incentives the government gives people, it is not working because there is something greater going on. Considering that in real economies interest rates would be low if lenders had high faith that they would get their money back, maybe it is not the average citizen being irrational. To be rational in an economic market like this would be to save, not to spend. People are not getting tricked into getting rid of their fiat cash on something frivolous, even though by saving it is decreasing the value over time. People have lost faith. It is why precious metals like gold and silver are rising so quickly. It is why the Fed’s continued measures are having no effect. It is why people are protesting near Wall Street, why the Tea Party has become a prominent political presence, and why both “leaders” in the government and the people they lead are becoming increasingly agitated with each other. To only prove its futileness, the day after Operation Twist was set in motion, stocks closed sharply lower, with the Dow Jones falling 391 points (3.51%), the S&P 500 plunging 37.20 points (3.19%), and the Nasdaq plummeting 82.52 (3.25%). It is clear that on top of news of banks getting downgraded in both Europe and America, bad manufacturing numbers coming out of China, and the ongoing Greek crisis in the EU, that a small thing like ‘Twist’ is not going to gain any traction in a market still reeling from global events (JeeYeon).

Operation Twist will have an insignificant impact on the market. Picture the world economy on a roller coaster ride going over 150 mph, and the Fed is trying to put up a barricade made up of plank. It is clear this is not going to work. Everyone knows it, but the charade must continue. The government is increasingly backing itself into a corner. It is like your favorite television program. They keep on laying on twist after twist until there is finally nowhere to go (perhaps ‘Twist’ is the right word after all). The country is growing anxious with the burden of an economy which will not improve. What can be done? There are fewer beacons of hope. Europe is in a debt quagmire. Japan is reeling from a devastating tsunami, not to mention an economy still stagnated from the ‘90s. Even China revealed disappointing numbers when it came to manufacturing (not to mention their persistent inflation problem and real estate bubble). The Fed is doing the only thing it can: trying to alleviate the terrible news coming in from around the globe, but there is little it can do.

But are its policies actually creating more problems than they are helping? Yes. By distorting the numbers, creating money from nothing, and doping it all up on steroids, the central bank is delaying a future collapse which will happen, and they are making it worse when it does. Tangentially, myths from the world over tell of a dying-and-rising god. Let us take Osiris of the Ancient Egyptians as an example. The sun god was killed every day by the darkness of night, represented by Set, but in the morning he always returned. He was also fertility god. Dionysus, Mithras, Adonis, Baal, Tammuz, the Green Man of the Celts, even Jesus—they died, but by doing so they could give birth anew. Metaphorically, this tale tells us that for there to be life there must also be death. An economy which cannot fail is a zombie, a dead thing lumbering about, and that is what Mattich is saying. For green shoots to really appear, first there must be a fire which burns down the forest. A government (socialist) institution such as the Fed is not saving anything; it is only preserving a dead thing.

References:

Gongloff, Mark. "Operation Twist: A Solutin in Search of a Problem." The Wall Street Journal. 21 Sept. 2011. Dow Jones & Company, Inc. Web. 25 Sept. 2011. http://blogs.wsj.com/marketbeat/2011/09/21/operation-twist-a-solution-in-search-of-a-problem/?mod=google_news_blog

"JFK and Quantitative Easing: Twisted Thinking." The Economist. 31 March 2011. The Economist Newspaper Limited. Web. 25 Sept. 2011. http://www.economist.com/node/18486271?story_id=18486271

Mattich, Alen. "The Limits of Central Bank Policy." The Wall Street Journal. 23 Sept. 2011. Dow Jones & Company, Inc. Web. 25 Sept. 2011.

"Maturity Extension Program & Reinvestment Policy." Board of Governors of the Federal Reserve System. 23 Sept. 2011. Web. 25 Sept. 2011. http://www.federalreserve.gov/monetarypolicy/maturityextensionprogram.htm

Nasad, Nick. "FOMC Does the 'Twist', But Markets Respond With Risk-Off and USD Strength." FX Times. 21 Sept. 2011. Market Access Media, LLC. Web. 25 Sept. 2011. http://www.fxtimes.com/fundamental-updates/fomc-does-the-twist-but-markets-respond-with-risk-off-and-usd-strength/

Park, JeeYeon. "Stocks End Sharply Lower on Recession Fears." CNBC. 22 Sept. 2011. CNBC LLC. Web. 25 Sept. 2011. http://www.cnbc.com/id/44624491

Weekly Update News August 7th - August 13th

China warned on Sunday that the dollar will be "gradually discarded" by the world, saying that the "gold old days" of lending to the U.S. are over and calling for a new, safer reserve currency. These public lashings by America's biggest creditor came after S&P downgraded the U.S.'s credit rating to an AA+ last week and later warned that the U.S. has a one in three chance of it happening again in the future. Moody's threatened Washington with similar measures if it did solve persisting budget problems. The Chinese agency, Dagong, also let the American's debt slide from an A+ to an A a few days before S&P, a clear indication of Beijing's fear of the engorged spending of the world's large economy. Whether there will be a flight from the American currency on Sunday from the Asian markets has many waiting with baited breath. This is a terrifying predicament, and one that cannot be easily worked out of, if at all. An early indication came from Israel on Sunday, with Tel Aviv stocks closing 7% less, showing that there may be a bloodbath on the American Stock Exchange Monday. World leaders are considering a statement to ease market tensions. However, this did not happen as of early this week, and Japan's Nikkei fell over 2%. Gold broke the $1,700 mark for the first time early Monday morning, showing that the markets are handling the downgrade and instability in Europe uneasily. The Dow fell 600 points on Monday, the worst showing since the crisis began in 2008, but wildly swung up again on Tuesday. However, the dollar tumbled to new lows against the Swiss Franc on the Fed's promise to keep interest rates low. On Wednesday, the Dow fell, erasing gains, and European stocks were down 3.5% on rumors of a French debt downgrade. The Bank of England announced that an interest rate hike was no longer in the foreseeable future on news that the country is considering lowering future quarter predictions. Gold hit $1,800 an ounce on the New York Mercantile Exchange. The UN has taken this opportunity to start promoting a one world currency which will save the industrial world from the abyss. Is this really that surprising to anyone paying attention?

In the Tottenham district of London, home to one of the city's largest black communities, riots broke out Saturday night after a man was shot dead by a police marksmen. Stores were looted, buildings were burnt, and bricks were thrown across the street as the large anti-police mob fell on the city. 26 police officers were wounded, but have already been released from the hospital. The family of the deceised man, Mark Duggan, condemned the violence, with the man's brother saying, "The family's devastated. We don't want Mark portrayed as some kind of gangster. He was a family man." Twitter feeds reported some calls for people to return to Tottenham, stoking fears of future riots, and by Monday, chaos was spreading to Birmingham, Bristol, Nottingham, Leeds, and Liverpool, with flames of burning buildings and vehicles in images across London. The UK responded by putting 16,000 police on duty in attempt to squelch the madness, with London prison cells filling to capacity. Scotland Yard reports that it will start using plastic bullets on rioters and others are calling for water cannons, and one Tory MP, Matrick Mercer is calling for even tougher policing, saying, "‘I find it strange that we are willing to use these sort of measures against the Irish yet when Englishmen step out of line and behave in this atrocious and appalling way, we are happy to mollycoddle them." Some looters have forced others to strip naked to steal their belongings. And on Wednesday, three were murdered trying to defend their homes from looters in Birmingham. As economic conditions get worse, mob mentality will take over--we have already seen it Europe and in Asia. A video shows a man forced to take off his clothes. In the States, Philadelphia enacted a youth curfew to try and halt the mob attacks which have been happening in the city by black youths. The mayor told the perpetrators that "you have damaged your own race" and asked hip hop artists for their support in fighting the random mobs. In Boston, Navy Seals trained overhead, with helicopters weaving in and out between buildings in a joint federal-military exercise. Is the U.S. government preparing for a possible riot scenerio where they will need to crack down on its own citizens?

Disaster struck in Afghanistan over the weekend, with 38 people killed aboard a CH-47 Chinook helicopter in the Wardak province. It was the most deadly attack in the 10-year-old war and proves there is still danger in the insurgent-riddled country, when the U.S. is preparing to pull out--several media outlets have reported that the 19 Navy Seals killed in the incident were part of the team which killed Osama bin Laden; however, none took part in the actual assassination. The destruction of the helicopter was a trap set by the Taliban who knew where it was going to fly, with some officials pondering if the missile which destroyed the aircraft was a higher class of warhead. Could it be from Iran? Obama said that the toll was a "'a reminder of the extraordinary sacrifices made by the men and women of our military and their families, including all who have served in Afghanistan.'' Next door in Pakistan, Nato tankers were bombed on their way to Afghanistan, with at least 16 now inoperable, but the U.S. is still vowing to "stay the course". WND is reporting that Iran is preparing to wage a cyber war on the U.S., including sabotaging its power grids, for tampering with the country's nuclear program. Wounds are still fresh in the Ayatollah-controlled nation, with Stuxnet destroying the nascent uranium enrichment in 2010, and nuclear scientists consistently being assassinated, the most recent being Dariush Rezai-Nejad on July 23rd.

Weekly Update News July 31st - Aug 6th

On Sunday, the Senate Minority Leader, Mitch McConnell, said that a deal was close between Congress and the Obama administration on the debt ceiling. This is relieving news, especially with the deadline fast approaching on August 2nd, albeit meaning very little. The negotiations took place Saturday night, and resulted in a plan which will require no new taxes. The bill will raise the ceiling by about $2.4 trillion in spending, the biggest increase in history, but also cut the same amount over a 10 year period ($917 billion in the first phase, another $1.5 trillion in the second). The second $1.5 trillion cuts will be decided by a group of Senators, House members, and president (who has the ultimate veto power). Some are calling this bipartisan committee the Council of 13 or Super Congress, with Ron Paul sounding the alarm on his web site. Judge Napolitano also warned in an interview that this council is unconstitutional because it doesn't permit "normal Congress" to change the bill, only to vote yes or no. Ergo the legislative branch essentially sold away their right to run the country. Measures in the bill delay most austerity measures to 2014--minimizing the impact the deal will have on the economy in the near future, especially with Obama's reelection coming up in 2012. The Bush tax cuts are also set to expire in 2012--a fact which the president hopes will cure the unease felt by some of his party members. Obama announced Sunday, "I want to urge members of both parties to do the right thing and support this deal with your votes over the next few days." With reports of a deal finally being finalized, stocks jumped on Monday but quickly plunged with industry numbers receding more than expected. The national factory activity was below the projected 54.9, resting at 50.9--a reading under 50 indicates negative growth. This was the weakest showing in two years. The dollar remained at a low against the Swiss Franc, with the rating agencies still contemplating downgrading the U.S.'s Aaa rating. Moody's confirmed the rating on Tuesday but also gave the country a negative outlook, warning that the politicians in Washington need to make further actions to curb the expanding debt. A downgrade would result in rising interests rates, that would increase borrowing costs to $100 billion each year. It would also make consumer debt more expensive. Perhaps more importantly, the Chinese rating agency Dagong lowered the U.S. to an A with a negative outlook. Washington is now anticipating the S&P will lower its debt grade. This does not bode well for longterm American debt. On Friday, the S&P officially downgraded the U.S. debt to Aa, sending the financial industry into unknown waters when the Asian markets open Sunday morning. Congressmen who didn't support the bill, namely the tea partiers, were called addicts and delusional by an MSNBC host, Martin Bashir, and Joe Biden declared that the conservatives were terrorists earlier this week. This demonization of people is dangerous. When we want to start attacking people, we make them less than people--this sort of rhetoric can lead to Nazi Germany.

Politicians in Washington were clearly wrong if they thought by raising the ceiling the financial situation would miraculously fix itself--with numbers from last quarter dead at 1.3%, and the growth of Q1 changed to 0.4%--leaving many Americans feeling like a double dip recession is here, if it ever ended. Factory growth also faltered in Europe and Asia in July, with China's PMI drifting to 50.7 from 50.9 in June and export orders dropping in sync. Some analysts see China walking a fine line between inflation and growth--its pegged currency and glut of real estate could foment a dangerous scenario. Even in Germany factory activities are stalling, while the UK is preparing for bad news on growth. Belgium, home of the capital of EU, Brussels, is facing troubles of its own, having lasted 400 days without a government, and Israel is readying for a debt downgrade, with S&P warning that there is 50% chance it will happen in 90 days (a similar threat that it gave the U.S.). Panic is hitting Greece as the country prepares to selectively default under EU guidance. People are trying to pull money out of banks as fast as they can as Athens begins to look like Argentina in 2001. Greeks that can leave their country are doing so in mass. They no longer trust their government is doing the right thing for their country and that it has sold out to an international banking cartel run by elites. The contagion is spreading quickly to countries like Spain and Italy, their bond yields reaching new highs--standing at 6.45 and 6.25% respectively, "their highest level in 14 years" and "Italy's stock index fell 2.5 percent to its lowest in more than 27 months, dragged down by banks that have heavy exposure to Italian debt. European shares hit a 9-month low amid worries that slowing economic growth will make it even harder to overcome the euro zone's debt troubles" (Vagnoni and Mackenzie - Reuters). Berlusconi failed to calm fears Wednesday after a speech, with the eurozone crisis teetering on the edge, and Italian prosecutors taking S&P and Moody's documents to investigate their ratings. The CIO of Guggenheim Partners, Scott Minerd, told CNBC Tuesday, that Europe is on the "brink of a major financial crisis" because its "basically doing the same thing thinking they're going to get a different outcome," and that we'll soon see a flight to US Treasury bills.

Ron Paul says the American debt deal, which is being touted as great news for the world economy, fixes nothing and that the cuts the government is making is like promising you won't buy a Lamborghini. Paul's suggestion would be to freeze spending, since the U.S. government takes in $2.2 trillion a year in revenue, but spends $3.7 trillion. He added in another opposition piece that the deal, instead of cutting debt, actually adds another $7 trillion because $10 trillion in spending is authorized over a ten year period, but only $2 trillion is required to be cut. Essentially, the plan is a blank check for the federal government. With thunderous applause, the House passed the bill, after some fear that it may not have enough votes. As if she was a reincarnated goddess returning from the underworld, Giffords emerged from the doors in support of the bill, after being shot in the head last year. "So this is how liberty dies... with thunderous applause" Padmé Amidala lamented in Episode 3 as the Republic signed away its power to a dictator. Images of the Animatrix also pops in my head, with skeletons clapping enthusiastically after agreeing to black out the skies. The debt bill was signed into law by Obama on Tuesday, giving the Treasury an immediate ability to borrow $400 billion, which officially brought the US debt to over 100% of its GDP, the first time since 1947. Even so, stocks slid over 1% the same day, with downgrade fears still persisting because the bill passed only promised to cut half of what the S&P and Moody's were demanding. Obama later reflected on the crisis, "Our economy didn't need Washington to come along with a manufactured crisis to make things worse. That was in our hands. It's pretty likely that the uncertainty surrounding the raising of the debt ceiling for both businesses and consumers has been unsettling and just one more impediment to the full recovery that we need and it's something we could have avoided entirely." Several prognosticators are predicting gold to rise to $3,000/oz and silver to $65/oz in the next 6 to 12 months because of the continuing uncertainty from Europe and America and heavy demand out of China. A Reuters article commented on South Korea's large purchases of the precious even in the face of record high prices. With the only real way out of current spiral being inflation resulting from the printing of more money, commodities are a great bet to secure your future, and many countries are doing just that, including Russia, Thailand, the aforementioned South Korea, China, India, and even Greece.

Obama is like a European king or Roman Caesar--he parties as the serfs suffer. I picture a court with jesters juggling, midgets dancing, and sword eaters eating swords--Obama sits on his golden throne, a high chair with spikes along the top to represent sun rays. A servant feeds him grapes as he laughs and cheers, clapping his hands in delight. Outside his castle, people are digging holes in the mud and shouting "bring out your dead!" The country is on fire and Obama is either out-of-tune with the average American's plight, or he simply doesn't care. His 50th birthday bash is being prepared in Chicago, with helicopters flying over the city Wednesday morning, and will take place in the Aragon Ballroom in Uptown. It will showcase Jennifer Hudson, Herbie Hancock and OK Go for $50 or a max donation of $35,800. It seems Obama is doing a bit of early campaigning--but how much at the expense of the taxpayer? The Aragon costs $40,000 a night, and you can pay an extra $10,000 to get a picture with you and the president! Pat Brady, a Illinoisan Republican chairman said on Tuesday, "We're nearing a double-dip recession. We've lost 125,000 jobs here in Illinois just since he took office." The GOP is lambasting Obama, saying that this expensive outing should instead be used to help Americans with unemployment and the only job Obama cares about his own. They are taking pot-shots at an easy target, like shooting fish in a barrel. For some reason, I can't get the image of Prince Ali making his way to the Sultan's court. He rides on an elephant, surrounded by women and magicians. He smiles and waves and the crowd swoons. Trumpets blare. Singers sing, "Make way for Prince Ali" like in the Disney film. And why shouldn't he be partying? He just made out with one of the biggest power grabs in American history as well as a blank check to spend as much as he wants before the 2012 elections. Perhaps the Eastern king symbol isn't too far off--the Russian president Dmitry Medvedev called Obama on Wednesday to wish him a happy birthday. One thing led to another, and they're talking about Russia joining the World Trade Organisation--another victory for globalisation! Party time!

On Thursday, the Dow sharply fell over 300 points to 11,589, a 2% slide and the worse since December 2008. Another laughable government statistic released showed that the number of weekly applications dipped to 400,000--this is after they adjusted the week prior's to 401,000 from 398,000--the tally has been over 400k for 17 straight weeks. The government can claim anything as long as they fix it sometime afterward it appears. Apparently these statistics are proving that the economy is recovering, when in fact, the stocks prices are showing otherwise. Across the nation, people are suffering, feeling the walls coming in around them, the despair of losing a job, of not having enough money to pay back a loved one's treatment. In Bellview, California, a renter took the AC from the home and sold the parts for $18. From reports these reports, it appears the Golden State really is receiving a beating. A bronze statue of a dog in nearby San Franscisco has some speculating it was stolen for a quick buck, and in Apple Valley, California, school bleachers were grabbed for their aluminum. Food stamp use has a record 45.8 million users, almost 1/6 of the U.S. population, and they tell us the economy is improving? The Postal Service is close to defaulting, warning that it wouldn't be able to pay obligations to the federal government soon. Gerald Celente warns in his Trends Journal for summer 2011 that it is only a matter of time before another terror attack happens in the US: "What will another major terror strike mean? Should an attack hit one of the major NATO nations, the effects, this time, will go global. Bank holidays will be called, the US and other fragile economies will crumble, gold and silver will soar, and already-troubled currencies will crash. Economic martial law will be declared. Introduced as a temporary measure, once in place it will remain in place (like the curfews and draconian security precautions installed by despots and dictators everywhere). Civil rights will be suspended and, particularly in America, Homeland Security, already intolerably intrusive, will achieve an Orwellian omnipresence." Could this Council of Six or Super Congress be just another step on the way to complete 1984-esque control of the country? The Obama administration is certainly stepping up gun grabbing, with the ATF demanding that gun shops report to them if someone buys more than one firearm in Texas, New Mex, Az, and Nev. This measure is, if not unconstitutional, illegal. There is no law written down that they can force any shop owner to do this. Shocking news from El Paso indicates that the feds may have let a drug cartel move cocaine for information on other gangs. The hypocracy of the government is disgusting. They can create strange new weapons like a pain ray, "screaming microwaves that pierce the skull, and "mobile biometrics", and facilitate arms and drugs crossing the Mexican border illegally, but they want to control our use of weapons.

An Infowars article by Kurt Nimmo reports that Michael Hayden, a former higher up in the NSA and CIA, is calling on a "Digital Blackwater" to patrol the internet. With groups like Anonymous and LulzSec calling all out war on elitist activities, even posting Nato communications after hacking a U.S. cyber supplier, and trying to shine the light on the Bohemian Grove last month, the higher ups are starting to get increasingly nervous of the power of the internet. Reports on Wednesday say that Governments, IOC, and UN were the victim of an unprecedented cyber attack, claims McAfee. This time the blame is falling China, which has denied such allusions in the past. Americans should worry that these attacks could be used as reasons for tighter controls on the internet from the Federal Government.

In Syria, 80 activists were killed in the city of Hama on Sunday when the regime tanks and snipers started firing on civilians. Countries in the West feigned horror, with Obama lamenting that "the reports out of Hama are horrifying and demonstrate the true character of the Syrian regime," and France and the UK also condemning the actions. Italy called for for a statement from the UN Security Council. However, countries like Russia, China, South Africa, India, and Brazil have so far blocked actions by the UN. They are afraid that by condoning such measures may give NATO the go ahead for military action like it did in Libya. The casualties in Hama are particularly significant because it was this city where Bashir's father, Hafez, crushed the resistance almost 30 years ago. One activist, Yasser Saadeldine, said, "Assad is trying to resolve the matter before Ramadan when every daily fasting prayer threatens to become another Friday (of post-prayer protests). But he is pouring oil on a burning fire and now the Hama countryside is rising in revolt." The attack on Hama continued on Monday and killed at least four more civilians, bringing the total to 84. According to DEBKAfile, an Israeli voice piece, Assad is now waging war on a 20,000 square kilometer area (about the size of Israel), on the "the 3.5 million inhabitants of Hama, Deir al-Zour, Homs, Idlib and Ar-Raqqah." The death toll of this expansive region Sunday was 150, with dark clouds rising over the dissident city of Hama. The article reports that Assad's confidence was bolstered by the resignation of Turkish Military Officials and the failure of the U.S. to act after a debt deal was made, with "urgent White House requests Sunday night to Turkish Prime Minister Tayyip Erdogan to send into northern Syria the Turkish units held ready on the border for two months to establish a protected zone for refugees and the growing number of Syrian army deserters seeking asylum. Operational plans for this incursion had been in place for some weeks, ready for execution as soon Assad launched a general offensive against the opposition" (Debka). Other Arab countries have remained silent on the Syrian bloothbath, except for the outspoken country Qatar, where al-Jazeera is based, which continued the freezing of the country's assets. Another Debka article reports that Russia has gone out of its way to defend Assad, but at the same time wishes to halt Iran's reach for a nuclear weapon, writing "Russia will block a strong UN Security Council resolution condemning its ally Syrian President Bashar Assad for his brutal crackdown on dissent, thereby shutting the door to approval of Libya-style outside military intervention. Tehran will reciprocate by cooperating with the Russian plan for solving the nuclear controversy along the lines proposed by Foreign Minister Sergey Lavrov in mid-May: '…each time when Tehran satisfactorily answers the questions or concerns of the International Atomic Energy Agency (IAEA), it should be encouraged, including some sanctions should be frozen,' he suggested" (Debka). The UN Security Council finally passed a resolution Wednesday, condeming Assad's actions against his own people, however sanctions can't be applied--the Council is not a stepping stone for future measures. The Syrian opposition claimed the measure was too little, too late. A leader of the demonstrators, Ausama Monajed, said, "After more than 2,100 people were killed, is this the language we want to see from the United Nations Security Council? Do we need to wait for a million people to be slaughtered on the streets of Syria before the international community takes action? We are watching another Rwanda take place, another Darfur, another Kosovo and the international community is doing nothing." A Thursday article reported that "people were being slaughtered like sheep" with young boy being run over by a tank on a motorcycle. The death tally may be as high as 250 killed this week.

The US and Saudi Arabia are looking into an "India-style" nuclear pact, with fears of Iran's growing influence in the region. Iran's arms are reaching around the Middle East's largest country, with the Persians waging a proxy war in Yemen and gaining more control in Iraq. The Saudis are growing increasingly fearful that Iran will obtain a nuclear weapon, forever changing the power dynamic between the two. This report is unsurprising, but it is also here where Osama in Laden hails and gave birth to many of the extremists responsible for 911. Iran, the country with the second largest oil capacity in Opec, has a growing role in the cartel. A commander in the Iranian revolutionary guards, Rostam Ghasemi, was made president of Opec. He has had sanctions on his head from the U.S., EU, and Australia. Some see this as a move by Admedinejad to heal ties between the Ayatollah, who controls the guard, and will also allow the guard unprecedented control over the cartel and the world's oils prices. In Egypt, the army broke up the protests in Tahir Square on Monday. The demonstrators, who are angry with the regime they see as a continuation of the former president's government and the delayed trials for officials and police who ordered and carried out the attacks on protesters in the winter and spring, also showed a more conservative element, making commentators worry that the country may start seriously considering Shia law. Mubarak himself has acknowledged that he will appear in court later this week and did on Wednesday. He was rolled out in a bed and placed in an iron cage on live television, a common practice in the Middle East. His sons, Alaa and Gamal, and several other accused officials were also with him. Mubarak denied the claims made against him. For the last few months the 83 year-old has been held in the resort town of Sharm el Sheikh by the Red Sea, but after the proceeding the judge said he would be transported to a hospital in Cairo. These trials are significant because it is the first public hearing of a leader who was ousted during the Arab Spring and was watched closely across the Middle East. In Libya, another country still realing from protests, Seif al-Islam el-Gaddafi, Muammar's son, said in an interview that he will try to form ties with Islamists. “The liberals will escape or be killed,” he said “We will do it together. Libya will look like Saudi Arabia, like Iran. So what?” Will the Arab Spring give birth to more liberal democracies, or will see Shia law gripping futher into the Muslim periphery?

In Russia, Putin blasted the US as a "parasite" on the world economy, living beyond its means, and capitalizing on the dollar monopoly. He called for a new reserve currency, on what many see as early campaigning before his run for presidency in 2012. Relations between the US and Russia had seen an improvement when Medvedev took over Putin's office in 2009; however, things have recently been souring with a bill in the US Congress condemning Russia's human rights record. The Eastern country has said it would stop cooperating with the US on Iran and Afghanistan if the bill passed, and even pulled back on its negotiations with Libya. A Washington Times article claims that the Russians have stepped up harassing U.S. diplomats in former Soviet countries, saying that some have "found their homes broken into and vandalized, or altered in ways as trivial as bathroom use; faced anonymous or veiled threats; and in some cases found themselves set up in compromising photos or videos that are later leaked to the local press and presented as a sex scandal" (Eli Lake - WT). Will the Arab Spring spread to Israel? Most municipalities in the Mediterranean country decided to recognize the protests as legitimate and declared a strike. The demonstrators are angry about the high price of housing. Netanyahu and the Israeli Treasury are at each other's throats about how to proceed, with the Finance Ministry Director Haim Shani resigning from his office. Israel is one of the last true bastions of stability in the Middle East, if it goes under, who knows where the dominoes will fall.