A possible economic meltdown is worrisome enough, but a possible meltdown in an election year is downright frightening. For months now, Republicans have been pushing the White House to take some action that looked and sounded big enough to give them some cover if and when things got worse. President Bush has now responded with a stimulus package more than twice as large as the one Bill Clinton briefly entertained at the start of 1993 but couldn't get passed.

Not to be outdone, Democrats want to appear at least as bold, which means they'll suspend pay-go rules and throw fiscal responsibility out the window. In other words, hold your noses, because the "bipartisan" stimulus package that's about to be introduced could be a real stinker, including tax cuts for everyone and everything under the sun - except, perhaps, for the key group of lower-income Americans. These are the people who don't earn enough to pay much if any income taxes, but who are the most likely to spend whatever extra money they get and therefore are most likely to stimulate the economy. The real behind-the-scenes battle will be over whose constituencies get what tax cuts, and for how long. Don't be surprised if the only thing Congress really stimulates is campaign contributions.

Pay-as-you go was always a fiction. The Republicans hammered social spending and Clinton went along with them and they balanced the budget for exactly one year. This was an election year so Bush went about the US famously waving four dollar bills. He talked about the looming surplus and how we could have tax cuts and this would be good for America. The stock market was, at the beginning of this fun election, at a peak which in some ways, it has never regained. Last summer's peak is actually smaller than that peak if we take inflation into account. Real inflation, of course, or better: the value of gold.

The collapse of the value of stocks, bonds and the currency vis a vis the ancient standard for calculating the value of things is quite striking and troubling. It shows there is something very wrong with the other systems set up to deal with savings, investing and finances. It is now wonder to me to see the entire banking system collapsing when we consider the astonishing rise in the value of gold.

Gold is what we hoard. There is industrial use for gold, of course. But in general, we use it to put aside wealth. We can borrow money against this gold. This is how the first banks in Europe operated, they were the famous three balls of the pawn shops. You still can go to a pawn shop and use hard things like rings of gold as collateral for a loan which the pawn shop holds for either redemption or sale. Houses are in this category. Even though we get to live in them while they are in pawn, if the lender doesn't get a payment on the loan connected with the property, and the ONLY thing the lender is interested in is the INTEREST PAYMENTS. They have so little interest in the principal, they actually beg people to do the interest-only loans and if that isn't good enough, they will even forego present interest payments for double interest payments in the future. So long as increasing sums of money flow. Indeed, due to rising inflation caused by too many cheap loans, these future-interest rate hike plans were the most popular tranches in the financial trading houses. They loved these particular ponies and selling of these bonds was the most profitable for the banks lending money to home buyers across the planet.

Then this smooth road took a violent turn into the swamps of despond. Just like in the fairy tales, the hero is happily swinging along the Easy Road and has told the Good Fairy to drop dead, when he plunges into a terrible swamp filled with alligators and pythons. Now he cries out for help. The Fairy shows up and says, 'Oh dear. This is what happens when you don't listen to me, I am Safety. You listened to that little demoness, Risky. I told you she would betray you, she is the daughter of mother Death and father War.'

The childish belief that millions of people on this planet who could not afford the already dangerous standard loans with 20% down and regular payments for 20 years and then, 30 or even 40 years, that these overstretched buyers of overpriced properties could pay higher and higher interest rates over the foreseeable future, this was pure insanity. But the idea that someone would be locked into debts that repay no principal at all, forever, at ever-higher rates so they couldn't even escape via inflation, that is the key here!

They can't escape their debt via INFLATION. This left the danger of default. To insure this never arises, the same demonic lenders went to the governments to try to prevent this ultimate escape from debtor's prison. They succeeded in making default much, much harder. But buyers of homes still seek to escape this in various ways.

A tipping point? "Foreclose me ... I'll save money"

A homeowner who can't sell his house tells the L.A.Times, "Foreclose me. ... I'll live in the house for free for 12 months, and I'll save my money and I'll move on."

Banks and lenders fear this kind of thinking - that walking away from a house could be the smart economic move - appears to be on the rise. Wachovia, in a conference call yesterday, warned investors that increasing numbers of homeowners are walking away from their homes by choice: "... people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they've lost equity, value in their properties..." *snip* "I have purchased a cheaper place in a nearby area now, while my credit is good, and will stop making payments on house #1 after house #2 closes. I know the foreclosure will be on my credit for 7 years, but I will have saved a lot of money.

"I realize I agreed to the deal when I signed the mortgage papers, but I am within my rights to walk away from a bad deal and suffer the consequences, just as many corporations write down billions of dollars of debt, lose money for their shareholders, and lay off people as a result of their bad decisions.

This man here illustrates what is going to cause a Great Depression: the amorality of the top has now finally corrupted the lowest levels. If we all think like the demons at the top, we all end up doing the same amoral things and this leads to a collapse. Someone has to be 'moral'. If we all throw ourselves off the same cliff at the same time, we are called 'lemmings'. The US has had this severe banking crisis which is due to the collapse in savings and the inflation of the value of the things we are pawning. This is unsustainable. The pawn shop collapses means we all can't pawn anything in the FUTURE.

Note how this one commenter in California thinks: he can cheat his promises to pay interest while buying yet another house for himself. Then, he moves into that and it won't be taken from him when he declares bankruptcy. He then gets to dump his bad 'investment' and live just fine, thank you.

Of course, this causes global finances to collapse. Being self-centered, he is imitating the self-centered creatures who have driven the entire planet deep into simultaneous debt and inflation. But this also leads all parties to the inevitable collapse. As word gets out that people can buy a second house that is now much cheaper than the first and then dump the first house, this will cause TOTAL COLLAPSE OF THE HOUSING MARKET. And not for 5 years as is the usual in retractions in the past but more like 20 years like after the collapse of the Great Depression. The risk, in other words, is still increasing and indeed, is accelerating.

The hopes of collecting infinite interest payments on loans that can never be repaid is collapsing in the housing sector. But it gets worse. There are other interest payments that are in trouble. What caused the Great Depression wasn't the bankruptcies of day traders or home owners or farmers, even.

It was the bankruptcy of major empires: Germany, Russia, Great Britain and France. They owed much more than all the homeowners on earth owed. They owed monster amounts of money due to expenses of WWI and the failed attempt at socialism in sub-capitalist Russia. This caused WWII.

Far from moving to virtue after our buying binge here, we are moving towards more amorality. Everyone is seeking to either increase their debts and drop interest rates willy-nilly by fiat of the central bankers or they will go bankrupt after cynically preparing themselves for this by exploiting the system. Each of these bankruptcies will force more to go bankrupt since more houses will suddenly default and enter the markets, a snow ball effect that will trigger an avalanche. Back when housing prices were much too high, the central private banks of the US Fed should have raised the reserve ratios as they are doing in China this year.

Instead, they dropped the ratios. Just as Greenspan dropped the rates when the tax cuts were driving the US deep into debt.

Back to Reich's good article:

The presidential candidates will be asked what should be done about the worsening economy, and they'll give vague answers. None will likely admit the truth: We're going to need the rest of the world to bail us out.

The 'rest of the world' is actually only three entities: Japan, who wants to keep us under their thumbs forever, China, who wants Taiwan now and the Arabs who want Jerusalem back. These real estate as well as power changes will eventually happen. We sold our sovereignty long ago. Now the terms must be kept and the reluctance to do this will cause a world war.

I googled the news stream for Asia's joy at our stupid desire to go further into debt and buy more Asian goods:

Just look at it! They are jumping for joy. They can't believe we are so stupid. As we flounder in the swamps of despond, we are begging the DRAGON of China and the PYTHON of Japan to save us? HAHAHA. The fairy, Safety, shakes her head in despair while the cute demon daughter, Risky, laughs with glee. The US stock market can barely struggle along but the Asian markets are again, shooting to the moon. The rescue plan will not stop a host of people dropping their expensive houses and the collapse of the housing markets but it will sell more manufactured goods from Asia. Exactly what we should NOT be encouraging.

Reich also mentions the 'PAYGO' system. This has become like PLAYDOH: it is infinitely malleable. It gets changed constantly as we manipulate it. From the get-go, the politicians used every trick in the book to evade the true meaning of PAYGO. Let's first look at the history of this bizarre and futile attempt at stopping reckless spending by our empire:

History of PAYGO:

An important example of such a PAYGO system in this first sense is the use of PAYGO rules in the United States Congress.

First enacted as part of the Budget Enforcement Act of 1990 (which was incorporated as Title XIII of the Omnibus Budget Reconciliation Act of 1990), PAYGO required all increases in direct spending or revenue decreases to be offset by other spending decreases or revenue increases. It was thought that this would control deficit spending.

Direct spending largely comprises "entitlement spending," which means that a group of beneficiaries are entitled to a benefit and, without further legislative action, the government must provide that benefit - hence it is considered to be "mandatory." Only by legislative action can the benefit be either expanded or reduced. In terms of revenue, PAYGO largely is designed to control tax reductions. If revenue is estimated to be reduced through a reduction in tax rates of any kind, that effect on the deficit must be offset either through increased revenue collection elsewhere, or spending reductions of the same amount.

In the initial PAYGO regimen, enacted in the Omnibus Budget Reconciliation Act of 1990 (OBRA '90), by statutory requirement, any increases in the deficit were to be offset by an across the board "sequestration" of programs. This means an automatic cut in non-exempt mandatory spending programs - this was calculated by the Office of Management and Budget at the end of the year.

First, they felt they could handle all this thanks to spooking Americans into increasing the SS withholding tax to pay for us baby boomers, retiring. This scam was the basis for dropping income taxes on the wealthy. Instead of indexing taxes to inflation, they never do this, they simply use the inflation effects to run on anti-tax platforms. This childish way of getting elected has led to a morality that is all about evading taxes and looking for hand outs of some sort. Therefore, to get elected, politicians do what Bush did: wave four dollar bills while yelling that if elected, one of these will be given back.

Indeed, now people not paying taxes want hand outs. And the rich want ever bigger free rides. One of them, Romney, is a tax cheat who wants to be President! The desire to have a free ride is encouraged. Instead of talking about savings or protecting the future and avoiding easy answers, everyone wants hand outs from our Asian competitors who have their own agendas. Making America powerful is one of them. Indeed, we should be collectively alarmed about going into hock to Asia. And Europe. And the Arabs as well as Canada and all of the southern half of the hemisphere.

The PAYGO system didn't last very long. We did really well as Congress and the President struggled to deal with it but several things happened which set us on the wrong course. The chief thing was in Japan: they went into a government-created depression. Then, as they wiped out all the systems that brought in imports from the US, they then set up an eternal depression machine so they could have super-low interest rates which were ONLY for export corporations. They then discouraged any outside investors due to this fake depression and simultaneously began to rapidly build up the world's biggest FOREX reserves until the Chinese overtook them.

The other thing that destroyed our PAYGO system was China. Imitating the Japanese, they also built up a huge FOREX reserve but they didn't do the 'destroy the workers' part that Japan is using. They did use the differential in wages vis a vis the rest of the industrial world, to undersell everyone. This way, they moved the bulk of world manufacturing to their country. This rapid industrialization is bearing fruit for China. They are much richer and much more powerful thanks to it.

And we are the reverse. The PAYGO system was set up deliberately on a specific day: the Louver Accords in Paris. The G6 nations cooked it up as they tried to balance world trade but it was very insincere. For Europe and Japan desperately wanted UNBALANCED trade! The US wanted balanced trade. So this goofy thing was drawn up to fix a problem no one but the US wanted to fix. And the US really didn't want to fix it, either, they wanted to pressure the trade partners into giving us more free loans.

Statement of the G6 Finance Ministers and Central Bank Governors (Louvre Accord)

Canada, France, Germany, Japan, United Kingdom, United States

Paris, France, February 22, 1987

2. The Ministers and Governors were of the view that further progress had been made since the Tokyo Summit in their efforts to achieve a sustainable, non-inflationary expansion. Their national economies are now in the fifth year of expansion, and the prospects are for continued growth this year, although the level of unemployment remains unacceptably high in some countries. A high degree of price stability has been attained, and there have been substantial reductions in interest rates. Exchange rare adjustments have occurred which will contribute importantly in the period ahead to the restoration of a more sustainable pattern of current accounts.

3. Progress is being made in reducing budget deficits in deficit countries, and fundamental tax reforms are being introduced to improve incentives, increase the efficiency of economies, and enhance the prospects of higher growth. Other important structural reforms are also being carried forward, including deregulation of business to increase efficiency and privatization of government enterprises to strengthen reliance on private entrepreneurs and market forces.

4. These positive developments notwithstanding, the Ministers and Governors recognize that the large trade and current account imbalances of some countries pose serious economic and political risks. They agreed that the reduction of the large unsustainable trade imbalances is a matter of high priority, and that the achievement of more balanced global growth should play a central role in bringing about such a reduction.

5. The Ministers and Governors reaffirmed their concern over continuing pressures for protectionism. They agreed that efforts to deal with economic problems by erecting trade barriers were self-defeating and pledged to intensify their efforts to resist protectionism and reaffirmed their strong support for the new round of trade negotiations. They welcomed the progress made in the preparatory work for the new GATT round and the recent positive conclusions of discussions between the United States and the European Community on bilateral trade issues.

6. The Ministers and Governors recognized that the major industrial countries have a special responsibility to follow policies which foster an open, growing world economy in order to support the efforts of developing countries, especially debtor countries, to restore steady growth and viable balance of payments positions. They noted that the progress achieved by many debtor countries toward these ends have not solved all the problems and stressed the importance of all participants in the strengthened debt strategy reinforcing their cooperative efforts.

7. The Ministers and Governors agreed to intensify their economic policy coordination efforts in order to promote more balanced global growth and to reduce existing imbalances. Surplus countries committed themselves to follow policies designed to strengthen domestic demand and to reduce their external surpluses while maintaining price stability. Deficit countries committed themselves to follow policies designed to encourage steady, low-inflation growth while reducing their domestic imbalances and external deficits. To this end, each country has agreed to the following undertakings.

The fear that the US would use the ancient and very useful tools of tariffs and barriers to protect our country's industrial and commodity base was very strong. There is no way they wanted this to stop. The US had to stop the deficit spending but cutting the government's obligations to the populace was the most popular option since the other nations in this accord wanted to use our military for free so they did NOT want our grotesque military spending to end. Nor did they want to pay for it.

Military manufacturing is over 80% of our manufacturing base. The US is also the biggest arms and military equipment exporter on earth. So we balance our trade deficit via military sales. But all this costs us very dearly since the Pentagon eats up a huge hunk of our finances. The military budget is nearly as big as the trade deficit. And they are connected. Our navy protects non-American shipping. Our own shipping is in a state of collapse. Just like we allow offshore banking, we allow offshore shipping. The US government loses control of the banking systems, the shipping systems and all the related parts which is why we are in grave danger from these same sectors. The simple act of not allowing our own corporations to outsource, out-ship and to avoid taxes is what is killing our nation. Now, everyone is being encouraged to move outwards: invest savings overseas like crazy, to avoid taxes, to stiff the banks by moving out of houses losing value, to run for the hills, indeed, to even abandon this nation.

England, for example, is seeing its retirees leave for other lands. The cheques that go them now flow to other nations where they are spent. American retirees are increasingly doing this, too. All over the planet, people are leaving their obligations to the next generation and decamping. This process, if a depression happens, will lead to the nations sending cheques to retirees to suspend this in the name of saving the main banking systems. Then the host nations will confiscate the property of non-citizens. We know what this process looks like. History books show us every step of this process.

The Government of Japan will follow monetary and fiscal policies which will help to expand domestic demand and thereby contribute to reducing the external surplus. The comprehensive tax reform, now before the Diet, will give additional stimulus to the vitality of the Japanese economy. Every effort will be made to get the 1987 budget approved by the Diet so that its early implementation be ensured.

A comprehensive economic program will be prepared after the approval of the 1987 budget by the Diet, so as to stimulate domestic demand, with the prevailing economic situation duly taken into account. The Bank of Japan announced that it will reduce its discount rate by one half percent on February 23.

The United States Government will pursue policies with a view to reducing the fiscal 1988 deficit to 2.3 % of GNP from its estimated level of 3.9 % in fiscal 1987. For this purpose, the growth in government expenditures will be held to less than 1 percent in fiscal 1988 as part of the continuing program to reduce the share of government in GNP from its current level of 23 percent.

The United States will introduce a wide range of policies to improve its competitiveness and to enhance the strength and flexibility of its economy. Monetary policy will be consistent with economic expansion at a sustainable non-inflationary pace.

Japan did follow the protocols of this accord. And had their famous bubble. Right after the collapse, they huddled and decided to go a new route: the deflationary/closed border business that did so well in the past. The only hitch was to convince the US to not follow suit. They figured out a scheme that worked very well in this regard: the carry trade. If they loaned money to us at 0% or slightly higher, interest rates, we would take on infinite debt if they never asked for any money on the principal! And voila! The vast sea of red ink began to flow after 1994!

The lack of will power to confront this business and end it is singular. The addiction to this free money has now infected all systems and all minds. It has demoralized us to the point, we are now wanting to have 0% interest, ourselves. Japan is so frantic to keep this mess going, they now acknowledge that inflation is well above the present rates but they will drop the bank's rates anyway, just to keep the carry trade going. The US and Japan are also very frantic to keep the yen weaker than the dollar for the same reason. But both are being hammered by the Chinese who are the #2 economy of the world now, sharing this with Japan's #2 status. China is for raising reserves, raising interest rates and raising the value of both the yen and the yuan. This policy as utterly paralyzed world banking which has become totally hitched to the Japanese lending machine.

The Chinese are being very sensible here. They know they have a huge trade surplus. So they are asking both the US and Japan to honor both the Plaza Accords and the Louver Accords. But the US, even if we do what these accords ask, cannot also keep free trade going. It is now too late. We have no serious industrial base anymore. To rebuild, we must use the old tools of tariffs. Just like the Chinese are trying to use the old tools in banking of increasing reserves and ratios to stop inflation.

The desire for 0% loans is very alluring. Of course, this leads to $0 savings. And worse, pretending there is no inflation a la Japan and the US today. I googled for a chart that uses the Gross NATIONAL Product rather than the Gross DOMESTIC Product which gives us a false reading. The US no longer uses the GNP because it shows our loss of manufacturing power if we use the GNP but since 72% of our economy is now spending money not making things, they use the GDP which is the consumer half, not the manufacturing half. Or rather the consumer 3/4 rather than the manufacturing 1/4.

"... Governments can spend, lend, or transfer money into circulation. They can lend at zero interest, or near zero interest. By wise use of these powers governments and the international community can end the debt slavery which is crippling the world economy." - John Hotson

John Hotson was Professor of Economics at the University of Waterloo, in Toronto. I was privileged to hear him deliver the following paper at the TOES summit in Sydney in 1993. He is the author of The COMER Papers.

Here is the chart that shows the old system. Note that over this century, consumer debt has begun to grow greatly after 1960. And the greatest growth begins when our international trade imbalance and government debts began to balloon.

Note how this expert dreams of no interest leading to financial freedom. Well, this is true. If you take on no debts, you will have no interest payments! Simple. Note also that if we have capitalist profits, the best way to get a return on it all is to use it as the basis of lending. The 10% or in the case of the West today, 4% of these profits can then fuel 10X or even in the case of modern financiers, 100X or even 500X the value of the reserves. And this happens only if there is some payback in the form of interest. So why can Japan have 0% interest?

It is very simple: it is a trade-off so the export corporations can get free money, the government of Japan can get free funds for spending at home and both can invade countries [Japan's military spending is higher than Europe's, for example] and they can invade foreign markets. They are willing to take a hit in not gaining much profit from lending since they are getting a gigantic profit in export profits. The biggest on earth, in fact. Something we have to constantly remind ourselves.

If an economy is to grow sustainably at its full employment potential it is necessary that debt grow no more rapidly than does income.

For debt to grow faster than income and wealth, and thus collateral to secure debt, is a formula for eventual breakdown at the individual or societal level. Particular difficulty occurs when income is falling in a cyclical downturn so that the debt/income ratio grows rapidly.If an economy is to grow sustainably at its full employment potential it is necessary that the price level not fall.

If debt grows more slowly than does income it would be possible for an economy ultimately to achieve a debt free state. However, such an economy would also have a constantly falling money supply if it depended upon the banking system for its money. A system with a constantly falling ratio of money to real output would only be sustainable if the price level continually falls as well. Although economists love to write about, and even advocate, such an economy, such a state of affairs has probably never existed, nor could exist, without massive unemployment. Keynes maintained that "for decades or even centuries at a time" the rate of interest is too high to allow full employment.

This section fits Japan except for one key thing: Japan is willing to put themselves into this negative flow even with the many downsides because it vastly improved their international trade statistics and thus, increased the national wealth significantly even as there was vanishing returns to the majority of Japanese. The dropping prices suit the government just fine since dropping wages match them. Only now, as energy inflation hammers the Japanese consumers and workers, is there agitation to stop this deliberate deflationary cycle.

Here is a Prudent Bear interview from 2003 from the same site:

PRUDENTBEAR.COM: Okay, but with Bretton Woods now old school, let's talk about how the dollar standard works today. What's to stop us from importing all the goods we want?

RICHARD DUNCAN: In 1988, the US was still a net creditor nation. Now, its net debt to the rest of the world is roughly $3 trillion Dollars, give or take a couple hundred billion. That's approximately 30% of US GDP or 10% of world GDP.Since the United States' current account deficit is now more than 5% of US GDP per annum, that means the United States' net debt to the rest of the world will rise to 35% of GDP by the end of 2004, 40% by the end of '05, 45% by the end of '06, and so on. Of course, this rise in net indebtedness as a percentage of GDP will be affected by the rate of GDP growth. But, it must not be forgotten that the GDP can contract as well as expand; and given the imbalances in the US economy a very painful recession is a more probable scenario than most would like to admit.The problem with the rapid increase in US indebtedness is that the United States must be able to service the interest on that debt. And, already, here things have begun to turn tricky.Foreign investors now own more than 40% of the US government's tradable debt, 26% of US corporate bonds, and 13% of US equities.What's next? Already US consumers are up to their eyeballs in debt. Overly indebted US corporations are going bankrupt in droves. Which sector of the economy will be able to issue (and service) an additional $500 to $600 billion worth of debt every year-year after year-so long as the present extraordinary trade imbalances persist?If new US Dollar debt instruments of this magnitude are not forthcoming, the surplus nations will have no choice but to convert their Dollar surpluses into their own currencies, causing them to skyrocket and the Dollar to plunge, thereby killing the export goose that laid the golden egg.Fortunately for the near term outlook for the Dollar, the US government has once again begun running massive budget deficits. And, there's no doubt, that the US government can service the interest on its own debt. This year the US budget deficit is expected to exceed $500 billion. However, the Current Account deficit will be $600 or more. So even if the surplus nations buy all of the US government bond issues (which is unlikely for a number of reasons) that's still not enough to absorb all of their Dollar export earnings. They would still have to buy more than one hundred billion of other Dollar denominated assets each year.Nonetheless, the re-emergence of very large government bond sales will provide a safe home for a good part of the Dollar export earnings of the surplus nations. Consequently, it will relieve some of the pressure on the Dollar, since the United States' trading partners will be able to park at least a significant portion of their Dollar earnings in US Treasuries, instead of being forced to choose between, one, investing them in over-indebted US corporations with questionable accounting standards or, two, throwing their economies into recession by converting their dollar earnings into their own currencies, and thereby causing them to appreciate sharply.

Still, this state of affairs cannot continue indefinitely. The United States cannot continue increasing its net indebtedness to the rest of the world at the rate of 5% of GDP per year. And, not even the US government can continue running $500 billion Dollar a year budget deficits forever.

Very good interview back when everyone was happy as could be, going to war while spending drunkenly at home. The US was hurting from 9/11 and wanted to feel good and we decided to binge out even though we were in bad shape. A pile of donut boxes and empty beer kegs later, we are waking from our stupor and wondering how we can pay next month's rent.

Click here to read the Plaza Accords. Always a good read. Very depressing. And now, time to see what the Japanese are thinking today:

Japan, China Becoming Less Dependent On U.S. As Trading Partner

TOKYO (Nikkei)-While Japan and China's dependence on trade with the U.S. is declining, both countries' economies could still be hurt by a further slowdown there.

They still need us but they can see that we are now on the verge of ditching our own responsibilities and are preparing to go bankrupt, en masse. So they are frantically trying to prepare their own mothership to fly to other markets. They know this game is nearing its end. But not yet! Since they still need us, we will still get the 0% loans from Japan and they and China will still buy our government debts and thus, protect their own economies from the flood of dollars coming in. But they are also at odds.

For China is trying to kill global inflation and Japan is trying to create more inflation via the carry trade. This is a serious point of conflict between them. I watch this carefully because our own games in international monetary markets is all about letting us continue to spend without paying any penalties with Japan assisting us in this game and China, alarmed at global inflation trying to change the direction of all the world's banking systems. And on top of all this is Germany: nightmare memories of Weimar Germany haunt them so they support the Chinese raising rates and reserves as well as ratios. A great battle of will power is now beginning to unfold. The banking mess in Switzerland with that inexperienced trader losing nearly ten billion bucks in bad SIV trades is just a symptom of all this, one that we will talk about later when more information comes in.

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