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To: Jim Willie CB who wrote (34620)1/11/2004 5:17:42 PM
From: stockman_scott  Respond to of 89467
 
A nightmare scenario for Bush...

[It's only a minority of economists that support such a scenario, but it sounds plausible.]

nytimes.com

The No-Bang, All-Whimper Recovery
By GRETCHEN MORGENSON
The New York Times
Published: January 11, 2004

The jobs report on Friday was a stark reminder to investors of why trusting the consensus view of anything economic - the stock market, interest rates, commodity prices - can be such a peril.

Economists had forecast an increase of 150,000 jobs in December. They were off by a mere 149,000.

Other aspects of the employment figures disappointed, too. More than 300,000 people dropped out of the job pool and the index of hours worked fell below the level of 1998. The manufacturing sector shed jobs, as it had for the previous 40 months, but so did the retail and financial service industries. Finally, November's upbeat job report was revised downward.

One economist who was unsurprised by the figures is Stephen S. Roach, chief economist at Morgan Stanley. Arguing for months that a lasting recovery cannot be built on an increasingly indebted consumer, a declining savings rate and widening current-account and trade deficits, Mr. Roach's has been a voice in the wilderness.

Bulls on the economy have snickered at his warnings that, contrary to some of the data, the domestic labor market was not rebounding. Now he looks prescient.

"We had a spectacular second half of '03 in G.D.P. because of tax cuts, the last-gasp spending of the refinance cycle and price cuts on motor vehicles," Mr. Roach said. "But we haven't had job growth and income generation. Consumers can't continue to carry the ball with their incomes lagging."

The consumer, of course, has been a stalwart spender for years in spite of significant job losses, a nonexistent savings rate and increasing personal debt. Counting out the consumer has been folly.

"I think the 90's taught people to spend not just out of their paychecks but also out of their assets," Mr. Roach said. First, the stock market, then their homes.

But the unpleasant reality remains that private-sector payrolls are now 7.5 million workers below the level that would be typical 25 months into an economic recovery, he said. This trend may well continue, he said, and for several troubling reasons.

They all have to do with the outsourcing phenomenon that has swept through the manufacturing world and is now threatening service jobs. Thanks to the Internet and the continued push for productivity, more American companies are turning to offshore workers.

And Mr. Roach sees no reason for that to change.

"In the last five months, 280,000 jobs have been created, a number that we get easily in a month during a normal recovery,'' he said. Most of the new jobs are in temporary staffing, health and government, he added.

"The days of an old-fashioned hiring-led recovery are over," Mr. Roach said. "And we have to face that, in terms of understanding the potential for our economy to keep growing as many in our financial markets are now blindly assuming will be the case."

Mr. Roach said the second half of 2004 might bring an economic relapse. Hmm. That would heat up the presidential race.

Also casting doubt on the recovery is Robert H. Parks, economist and professor of finance at Pace University. He said he thought that interest rates would rise significantly by the end of the year, pushed up not by Alan Greenspan, who never saw an asset bubble he didn't like, but by the bond market vigilantes. "Deficits financed by way of freshly printed money to fund tax cuts, pork-barrel spending and huge outlays for military spending are going to generate headline news on sharply rising interest rates, long before 2004 is over," Mr. Parks said.

Just something to think about for those with portfolios chock-full of high-priced stocks and bonds.



To: Jim Willie CB who wrote (34620)1/11/2004 10:08:26 PM
From: stockman_scott  Respond to of 89467
 
If 2004 goes bad, it will go really bad

moneycentral.msn.com

The dollar’s decline is going to cause huge problems, and the economy is artificially pumped up. When the deluge finally hits, I see stocks falling 50%.

By Bill Fleckenstein

With this, the first Contrarian Chronicles of 2004, I want to sketch out a roadmap of how I think events might play out this year.

It's been my experience that having an opinion (and strategy) for what you think may occur will help you to manage your portfolio. Of course, that strategy needs to be tweaked as new data come in.

My opinion is mostly a carry-through from last year. I continue to believe that the stock market, currency market and economy are basically all the same trade, and that the environment in which we live is as binary as any that's ever existed. That is, the market’s up and everyone is partying or down and all hell has broken loose.

Why do I think this? We have folks running the Fed (and the Treasury, for that matter) who are the most incompetent and irresponsible of all time. That's old news, but what's new, in my opinion, is their full-blown display of arrogance. They talk about keeping interest rates low indefinitely, while paying lip service to deflation or disinflation, when the opposite is happening in nearly every commodity market. (Editor’s note: The Commodity Research Bureau index is up about a third since last March.)

They shrug off the decline in the dollar when it's the world's reserve currency (and no longer a monopoly). The Fed and other bulls take foreigners' dollar appetite for granted, in terms of funding our huge current-account deficit, even as our macro position is horrible vis-a-vis our unfunded future liabilities, total debt outstanding and budget deficit.

Oh, those back-slapping central bankers

The fact that the "authorities" were able to produce a sizable stock market rally last year and a strong third-quarter GDP has prompted them to do a little end-zone dancing. Chairman Alan Greenspan's recent talk at the American Economics Association meeting in California was all about declaring victory. In as many words, he said, "So what if I created a bubble and didn't pop it? The recession was painless, and I've orchestrated the next recovery." It's kind of like a kid taunting na-na-na-na-na.

That has further fueled the Fed's arrogance in maintaining that the dollar's collapse doesn't matter. Though it will come to matter, the fact that it has not thus far has emboldened the Fed to believe in its own omnipotence. Once convinced it knew the future, the Fed now appears to realize that it might not know the future, but that doesn't matter, since it thinks it can fix anything. The Fed believes it can make the economy and the stock market do whatever it wants (though I'm sure it had its doubts for a while). Likewise, the Fed believes itself powerful enough to fix the currency market whenever it deems that necessary.

Make no mistake. The Fed does not have this power. Add to this the fact, first, that the "money-management business" (with its plethora of mutual funds, investment counseling firms, and hedge funds) has so many practitioners who've grown up in an era where it's all been about marketing and not risk management, and second, the fact that we have a public that wants to believe it will all be okay -- and you have a recipe for what we now have, which, to repeat, is an incredibly binary situation.

Slam-dunking toward disaster

The Fed, the money-management industry and the public, to some degree, are all in. Folks are either leveraged to the hilt in housing or real estate investments, and/or they are piling into stocks. In both cases, the rationalization is some variation of the greater-fool theory. It's being powered by all the liquidity spewing forth from the Fed, combined with the debt that's been created by the financial system, not least of which comes from the government-sponsored entities Freddie (Mac) and Fannie (Mae). So, we continue to build a bigger and bigger balsawood edifice, which is the current state of our financial markets. And we have this giant anvil dangling from dental floss above the balsawood structure, with the anvil being our burgeoning debt and collapsing currency.

The outcome of this whole tragedy to me is quite clear: I believe that stocks will at some point collapse. Fixed income in all likelihood (though this is less clear to me) will get shredded, thanks to what's going on in the dollar. The dollar will be further bludgeoned, and, I think, metals will go to places we can't even conceive of. What I do not know is the timing of all that. When will stocks start going down? When will the currency decline matter to the fixed-income market? When will the metals really go crazy?

Price as barrier to re-entry

I came into this year with no shorts and just my long positions in metals, metals stocks and Annaly Mortgage (NLY, news, msgs).
Regrettably, I had reduced my position in foreign currencies before going away on vacation. They are all up smartly, so I have been left a little behind on that trade. I did the same with respect to my trading position in the precious metals. So, while I have the full complement of my position in Newmont Mining (NEM, news, msgs) and Pan American Silver (PAAS, news, msgs) (the latter of which I am a director), my trading positions in foreign currencies and precious metals have been reduced. With prices having gone basically straight up, it's been hard to add to these trading positions. I am currently wrestling with how much of the present action in these markets is a function of new money, a bit of a mini-blowoff to this piece of the move, or just the start of acceleration to a mini-blowoff.

In order of imperativeness, I am much more eager to expand my position in precious metals and currencies (though my personal stock position in Pan American and Newmont is quite sizable), than I am to get short stocks. As has been the case, I think we'll be making plenty of money being long currencies and precious metals before we make money being short stocks. I've done nothing basically because the environment is so binary (and all these trades are different expressions of the same view) that I feel no compunction to rush into anything, especially in the shorting-stocks department.

I would rather be late to that party than early, since it's so clear to me that when stocks go down next time, they're going to go down for real. I anticipate that we will see a huge decline, with the major averages falling over 50%.

Ferreting out before forging ahead

Though I feel that I know how this movie ends, I don't know quite where we are and what action to take yet. (That's another big reason for my inaction over the last few weeks). I am searching for clues as to what to do in all those markets, and I will share with readers what I think and do once I arrive at a conclusion. Of course, there's no guarantee that I will be right. But for what it's worth, this is my roadmap and strategy for the year that's all of two weeks old.



To: Jim Willie CB who wrote (34620)1/11/2004 11:31:53 PM
From: stockman_scott  Read Replies (1) | Respond to of 89467
 
The Lies for War Unravel
___________________

By William Rivers Pitt
t r u t h o u t | Perspective
Monday 12 January 2004

truthout.org

Air Force Lt. Colonel Karen Kwiatkowski wore the uniform of the United States military for most of her adult life. In the last few years, until her retirement last April after 20 years of service, she has watched the infrastructure of American foreign policy creation rot from the inside out. Her view was not from the cheap seats, from some faraway vantage point, but from the hallways where the cancer walked and talked. Lt. Colonel Kwiatkowski worked in the same Defense Department offices where the cadre of hawkish neoconservatives that came in with George W. Bush trashed America's reputation, denigrated her fellow soldiers, and recreated the processes of government into a contra-constitutional laughingstock.

"My personal experience leaning precariously toward the neoconservative maw showed me that their philosophy remains remarkably untouched by respect for real liberty, justice, and American values," Kwiatkowski writes in the January 19 edition of The American Conservative magazine. "I was present at a staff meeting when Deputy Undersecretary Bill Luti called General Zinni a traitor. At another time, I discussed with a political appointee the service being rendered by Colin Powell in the early winter and was told the best service he could offer would be to quit. I heard in another staff meeting a derogatory story about a little Tommy Fargo who was acting up. Little Tommy was, of course, Commander, Pacific Forces, Admiral Fargo."

Kwiatkowski saw these people, and their work within the Office of Special Plans, up close and personal, and has been raising alarms about it for nearly a year. The Office of Special Plans, or OSP, was a Pentagon planning group directed by Undersecretary of Defense for Policy Douglas Feith, who was the department's No. 3 official. The OSP was staffed by the hawkish neoconservatives Kwiatkowski describes in her American Conservative editorial, men who had advocated using the American military to overthrow Saddam long before they came to work for Feith. The day-to-day boss of OSP was William Luti, a former Navy officer who worked for Vice President Dick Cheney before joining the Pentagon. The work of the OSP was, at bottom, to cherry-pick data from intelligence reports to justify an attack on Iraq.

Back in August of 2003, Kwiatkowski wrote, "What I saw was aberrant, pervasive and contrary to good order and discipline. If one is seeking the answers to why peculiar bits of 'intelligence' found sanctity in a presidential speech, or why the post-Saddam (Hussein) occupation (in Iraq) has been distinguished by confusion and false steps, one need look no further than the process inside the Office of the Secretary of Defense." She described the work of the OSP in particular as, "a subversion of constitutional limits on executive power and a co-optation through deceit of a large segment of the Congress". Kwiatkowski claims, in short, that a decision to go to war had been made long before, and that these men at the OSP were fashioning justifications for that decision on the fly, and despite overwhelming evidence to suggest that war was not necessary.

Lt. Colonel Kwiatkowski was not the only one watching the immediate desire for war in Iraq within the ranks of the Bush administration. Former Treasury Secretary Paul O'Neill, who lost his job because he dared question the efficacy of giving massive tax cuts to rich people, has stepped forward with some truly remarkable revelations about the way business is done at 1600 Pennsylvania.

O'Neill describes the process of decision-making between Bush and his people as being "like a blind man in a roomful of deaf people." This is not a comforting image when one imagines the deliberations of the most powerful people in the world. Yet the blind and the deaf, according to O'Neill and the 19,000 pages of memos, documents and private National Security briefings he has in his possession, were also adept liars.

Pulitzer prizewinning journalist Ron Suskind has captured O'Neill's views in a new book titled 'The Price of Loyalty.' "From the very first instance, it was about Iraq," says Suskind about his interviews with O'Neill and his review of the documentary evidence. "It was about what we can do to change this regime. Day one, these things were laid and sealed." Suskind got his hands on one Pentagon document, dated March 5, 2001. The document was titled 'Foreign Suitors for Iraqi Oilfield contracts,' and included a map of potential areas for exploration. "It talks about contractors around the world from, you know, 30-40 countries," says Suskind, "and which ones have what intentions on oil in Iraq."

O'Neill was afforded a position on the National Security Council because of his job as Treasury Secretary, and sat in on the Iraq invasion planning sessions. "It was all about finding a way to do it," says O'Neill. "That was the tone of it. The president saying 'Go find me a way to do this.'" This perspective is backed up by former Director of State Department Policy Planning, Richard Haass. Haass has quoted National Security Adviser Condoleezza Rice as saying, about pursuing UN cooperation on the Iraq invasion, "Save your breath. The president has already decided what he's going to do on this," in June of 2003.

CBS News reported on September 4, 2002 that notes taken by an aide to Defense Secretary Don Rumsfeld clearly state that the process towards war on Iraq was begun five hours after the attacks of September 11 unfolded. There was no evidence linking Hussein or Iraq to the attacks, and there is still none; George W. Bush was forced recently to publicly admit as much, and Secretary of State Colin Powell admitted on Friday that no evidence exists to connect Iraq to al Qaeda.

A report released in 2000 titled 'Rebuilding America's Defenses' issued by the neoconservative think tank The Project for the New American Century states, "The United States has for decades sought to play a more permanent role in Gulf regional security. While the unresolved conflict with Iraq provides the immediate justification, the need for a substantial American force presence in the Gulf transcends the issue of the regime of Saddam Hussein." In other words, whatever threat may be posed by Hussein is far less important than the need for the United States to establish a massive, permanent military presence in the Gulf region.

'Rebuilding America's Defenses,' and the think tank which published it, are important for two reasons: The Project for the New American Century had Dick Cheney, Don Rumsfeld and most of the architects of this Iraq war on its membership role in 2000; the desire and decision to attack Iraq existed in print from the hands of these men before they came to power with George W. Bush. In other words, September 11 had nothing specifically to do with it. "Go find me a way to do this," said Bush well before 9/11 about an attack on Iraq. Rumsfeld, surveying the hole blasted into the side of the Pentagon, had found that way.

The American people were let in on none of this. The scale of the deception is massive.

The American people were told that Iraq posed a direct threat to the United States because of its massive stores of chemical, biological and nuclear weapons. Those stores included, according to the White House, 26,000 liters of anthrax, 38,000 liters of botulinum toxin, 1,000,000 pounds of sarin, mustard and VX nerve agents, 30,000 munitions to deliver them, and a production line that would rapidly deliver nuclear weapons enriched with African uranium. Because of the "sinister nexus between Iraq and al Qaeda," as stated by Colin Powell before the United Nations on February 5, war was required immediately because those weapons could be delivered to terrorists for use against us.

Still, we were told, George W. Bush would work with the international community on the matter. We were told that war would be the choice of last resort. Reasonable people are running the show in Washington, we were assured, and no one is going to barnstorm into battle unless it is absolutely necessary. The Bush administration drafted Resolution 1441 on the matter of invading Iraq for the United Nations, and put the words "weapons inspectors" into the document. Those two words were the reason 1441 received unanimous consent from the Security Council.

Now, ten months and 500 dead American soldiers later, we have the truth.

The decision to attack Iraq was made within days of Bush's occupation of the White House. When the weapons inspectors failed to find any of the arms promised by the Bush administration, that administration attacked and undermined the inspection process and piled hundreds of thousands of combat troops onto the Iraqi border.

"Save your breath," said Condoleezza Rice. "The president has already decided what he's going to do on this."

The Washington Post reported on January 7, "In public statements and unauthorized interviews, investigators said they have discovered no work on former germ-warfare agents such as anthrax bacteria, and no work on a new designer pathogen -- combining pox virus and snake venom -- that led U.S. scientists on a highly classified hunt for several months. The investigators assess that Iraq did not, as charged in London and Washington, resume production of its most lethal nerve agent, VX, or learn to make it last longer in storage. And they have found the former nuclear weapons program, described as a 'grave and gathering danger' by President Bush and a 'mortal threat' by Vice President Cheney, in much the same shattered state left by U.N. inspectors in the 1990s."

Days later, a report by experts on weapons proliferation from the Carnegie Endowment for International Peace titled 'WMD in Iraq: Evidence and Implications,' stated that Iraq's weapons programs did not, "Pose an immediate threat to the United States, to the region, or to global security. With respect to nuclear and chemical weapons, the extent of the threat was largely knowable at the time. Iraq's nuclear program had been dismantled and there was no convincing evidence of its reconstitution.

Regarding chemical weapons, UNSCOM discovered that Iraqi nerve agents had lost most of their lethality as early as 1991. Operations Desert Storm and Desert Fox, and UN inspections and sanctions effectively destroyed Iraq's large-scale chemical weapon production capabilities. It is unlikely that Iraq could have destroyed, hidden, or sent out of the country the hundreds of tons of chemical and biological weapons, dozens of Scud missiles and facilities engaged in the ongoing production of chemical and biological weapons that officials claimed were present without the United States detecting some sign of this activity before, during, or after the major combat period of the war."

The report continued by stating, "The dramatic shift between prior intelligence assessments and the October 2002 National Intelligence Estimate (NIE), together with the creation of an independent intelligence entity at the Pentagon and other steps, suggest that the intelligence community began to be unduly influenced by policymakers' views sometime in 2002. There was and is no solid evidence of a cooperative relationship between Saddam's government and Al Qaeda. There was no evidence to support the claim that Iraq would have transferred WMD to Al Qaeda and much evidence to counter it. The notion that any government would give its principal security assets to people it could not control in order to achieve its own political aims is highly dubious."

George W. Bush and his people in the White House and Defense Department wanted a war with Iraq. They began seeking a premise for that war as soon as they arrived in Washington. They created the Office of Special Plans to fashion justification out of whole cloth. They browbeat analysts at the CIA and State Department to manufacture frightening portraits of an Iraqi threat that did not wed to reality. They used the terror created by September 11 against the American people to get that war, and lied time and again about the threat posed by that nation. All stated rationales for war - weapons of mass destruction, al Qaeda connections, the likelihood of another 9/11-style attack by Hussein or his agents - have been decisively disproven.

Lt. Colonel Karen Kwiatkowski knew it all along. "War is generally crafted and pursued for political reasons," she says in her American Conservative editorial, "but the reasons given to Congress and the American people for this one were so inaccurate and misleading as to be false. Certainly, the neoconservatives never bothered to sell the rest of the country on the real reasons for occupation of Iraq - more bases from which to flex U.S. muscle with Syria and Iran, better positioning for the inevitable fall of the regional sheikdoms, maintaining OPEC on a dollar track, and fulfilling a half-baked imperial vision. These more accurate reasons could have been argued on their merits, and the American people might indeed have supported the war. But we never got a chance to debate it."

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William Rivers Pitt is the Managing Editor of truthout.org. He is a New York Times and international best-selling author of three books - "War On Iraq," available from Context Books, "The Greatest Sedition is Silence," available from Pluto Press, and "Our Flag, Too: The Paradox of Patriotism," available in August from Context Books.

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