President Bush was described as confused, but not as confused as I am.
It was a strange day. When I asked my stockbroker what he was buying today, he said " CANNED GOODS, CANDLES AND AMMUNITION!"

Well with the market at this level, where will it go from here? Is there a market sector that will do well, that will out-perform the market?

There is little indication from the economic theories which state that:
1. The economy will recover and everything will be just great by the end of the year, or 2. The economy will collapse by the end of the year, or 3. The unsustainable deficit financing will collapse the dollar, or 3. The deficit is just fine and will not affect anything.

So, based on these totally contradictory theories each put out by people with lots of capital letters and periods after their name, we have no idea of what to do, do we?

Will the health sector do well due to the new government programs or will it do poorly as the government squeezes it for cost reductions?

Will the auto sector do well now that the government has committed some $100 billion to two auto companies, who have not earned that total during their combined 150 year in business?

Will industrial giants like GE or UNITED TECHNOLOGIES do well ?

Are all the ethanol plant owners now a good "buy" since they have bought out the bankrupt ones, on the cheap?

Do we buy coal companies or sell them?

Do we buy hotel chains or will the slower travel hurt them?

What about oil companies, buy or sell?

Housing, should we buy home builders or sell?

Gold, is it a buy or sell? Keep in mind that it was nearly this same price over 20 years ago.

Do we buy any of the commodities, the raw materials like copper?

Or do we just stay home, do not blow out any CO2, oops, got to breathe out though, and help the world with its "pollution" problems.

It is just so confusing. If we buy more products and spark the economy, we have to cause more CO2, but then again the administration tells us to not do that. It tells us on the other hand to go out and do it, do the spending, charge up our credit cards, then telling us NOT to change up our credit cards and live withing our means.

As usual, getting some help from the government gets you nowhere, it is just as confused as we are.

If this is not confusing, try reading the new CAP and TRADE bill.


By Larry Kudlow

Does anybody really believe that adding 50 million people to the public health-care rolls will not cost the government more money? About $1.5 trillion to $2 trillion more? At least.

So let’s be serious when evaluating President Obama’s goal of universal health care, and the idea that it’s a cost-cutter. Can’t happen. Won’t happen. Costs are going to explode.

Think of it: Can anyone name a federal program that ever cut costs for anything? Let’s not forget that the existing Medicare system is roughly $80 trillion in the hole.

And does anybody believe Obama’s new “public” health-insurance plan isn’t really a bridge to single-payer government-run health care? And does anyone think this plan won’t produce a government gatekeeper that will allocate health services and control prices and therefore crowd-out the private-insurance doctor/hospital system?

Federal boards are going to decide what’s good for you and me. And what’s not good for you and me. These boards will drive a wedge between doctors and patients.

The president, in his New York Times Magazine interview with David Leonhardt, said his elderly mother should not (in theory) have had a hip-replacement operation. Yes, Obama would have fought for that operation for his mother’s sake. But a federal board of so-called experts would have told the rest of us, “No way.”

And then there’s the charade of all those private health providers visiting the White House and promising $2 trillion in savings. Utter nonsense.

And even if you put aside the demerits of a government-run health system, Obama’s health-care “funding” plans are completely falling apart. Not only will Obama’s health program cost at least twice as much as his $650 billion estimate, but his original plan to fund the program by auctioning off carbon-emissions warrants (through the misbegotten cap-and-trade system) has fallen through. In an attempt to buy off hundreds of energy, industrial, and other companies, the White House is now going to give away those carbon-cap-emissions trading warrants. So all those revenues are out the window. Fictitious.

Anyway, the cap-and-tax system won’t pass Congress. The science is wrong. The economics are root-canal austerity — Malthusian limits to growth. And there are too many oil and coal senators who will vote against it.

All of this is why the national-health-care debate is so outrageous. At some point we have to get serious about solving Medicare by limiting middle-class benefits and funding the program properly. There is no other way out. We can grow our way out of the Social Security deficit if we pursue pro-growth policies that maintain low tax and inflation rates. Prospects for that don’t look any too good right now, though it could be done. But government health care is nothing but a massive, unfunded, middle-class entitlement problem. (The poor are already in Medicaid.)

Sen. Max Baucus (D., Mont.) proposes to solve health care by limiting employer tax breaks. He’s on to something, but he’s only got half the story. All the tax breaks for health care should go to individuals and small businesses. Let them shop around for the best health deal wherever they can find it with essentially pre-tax dollars.

Additionally, insurance companies should be permitted to sell their products across state lines. And popular health savings accounts — which combine investor retirements with proper insurance by removing the smothering red tape — should be promoted. This approach of consumer choice and market competition will strengthen our private health-care system.

So private enterprise can coexist with public health care and not be crowded out by the heavy-handed overreach of government. But the Obama Democrats are determined to force through a state-run system that will bankrupt the country.

I’m not somebody who obsesses about the national debt or deficit. But I have to admit: Today’s spending-and-borrowing is blowing my mind. As a share of GDP, we’re looking at double-digit deficits as far as the eye can see. Over the next ten years, the CBO predicts federal debt in the hands of the public will absorb 80 percent of GDP. And that doesn’t include the real cost of state-run health care. Other than the temporary financial conditions surrounding WWII, we’ve never seen anything like this.

The president’s grandiose government-takeover-and-control strategies are going to make things worse and worse — that is, unless members of that tiny band known as the Republican party can stand on their hind legs and just say no. The Republicans must come up with some pro-competition, private-enterprise alternatives for health, energy, education, taxes, and trade that will meet the yearning of voter-taxpayers for a return to private-enterprise American prosperity and opportunity.

Free-market competition will lower costs in health care just as it has every place else. It also will grow the economy. The GOP must return to this basic conservative principle and reject Obama’s massive government assault.

— Larry Kudlow, NRO’s Economics Editor, is host of CNBC’s The Kudlow Report and author of the daily web blog, Kudlow’s Money Politic$.


The world's economists have been predicting this event, and it happened sooner than you think. This event will affect everything in commerce, in the rate on your ARM mortgages, credit card rates, business and personal loans and everything else that is pegged or set through some ratio to TREASURY rates.


Liz Capo McCormick and Daniel Kruger

May 29 (Bloomberg) -- They’re back.

For the first time since another Democrat occupied the White House, investors from Beijing to Zurich are challenging a president’s attempts to revive the economy with record deficit spending. Fifteen years after forcing Bill Clinton to abandon his own stimulus plans, the so-called bond vigilantes are punishing Barack Obama for quadrupling the budget shortfall to $1.85 trillion. By driving up yields on U.S. debt, they are also threatening to derail Federal Reserve Chairman Ben S. Bernanke’s efforts to cut borrowing costs for businesses and consumers.

The 1.5-percentage-point rise in 10-year Treasury yields this year pushed interest rates on 30-year fixed mortgages to above 5 percent for the first time since before Bernanke announced on March 18 that the central bank would start printing money to buy financial assets. Treasuries have lost 5.1 percent in their worst annual start since Merrill Lynch & Co. began its Treasury Master Index in 1977.

“The bond-market vigilantes are up in arms over the outlook for the federal deficit,” said Edward Yardeni, who coined the term in 1984 to describe investors who protest monetary or fiscal policies they consider inflationary by selling bonds. He now heads Yardeni Research Inc. in Great Neck, New York. “Ten trillion dollars over the next 10 years is just an indication that Washington is really out of control and that there is no fiscal discipline whatsoever.”

Investor Dread

What bond investors dread is accelerating inflation after the government and Fed agreed to lend, spend or commit $12.8 trillion to thaw frozen credit markets and snap the longest U.S. economic slump since the 1930s. The central bank also pledged to buy as much as $300 billion of Treasuries and $1.25 trillion of bonds backed by home loans.

For the moment, at least, inflation isn’t a cause for concern. During the past 12 months, consumer prices fell 0.7 percent, the biggest decline since 1955. Excluding food and energy, prices climbed 1.9 percent from April 2008, according to the Labor Department.

Bill Gross, the co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co. and manager of the world’s largest bond fund, said all the cash flooding into the economy means inflation may accelerate to 3 percent to 4 percent in three years. The Fed’s preferred range is 1.7 percent to 2 percent.

“There’s becoming an embedded inflationary premium in the bond market that wasn’t there six months ago,” Gross said yesterday in an interview at a conference in Chicago.

Shrinking Economy

Bonds usually rally when the economy is in recession and inflation is subdued. Gross domestic product dropped at a 5.7 percent annual pace in the first quarter, after contracting at a 6.3 percent rate in the last three months of 2008, according to the Commerce Department.

This time it’s different because the Congressional Budget Office projects Obama’s spending plan will expand the deficit this year to about four times the previous record, and cause a $1.38 trillion shortfall in fiscal 2010. The U.S. will need to raise $3.25 trillion this year to finance its objectives, up from less than $1 trillion in 2008, according to Goldman Sachs Group Inc., one of 16 primary dealers of U.S. government securities that are obligated to bid at Treasury auctions.

“The deficit and funding the deficit has become front and center,” said Jim Bianco, president of Bianco Research LLC in Chicago. “The Fed is going to have to walk a fine line here and has to continue with a policy of printing money to buy Treasuries while at the same time convince the market that this isn’t going to end in tears with fits of inflation.”

‘Potential Benefits’

Ten-year note yields, which help determine rates on everything from mortgages to corporate bonds, rose as much as 1.71 percentage points from a record low of 2.035 percent on Dec. 18. That was two days after the Fed said it was “evaluating the potential benefits of purchasing longer-term Treasury securities” as a way to keep consumer borrowing costs from rising.

The yield on the 10-year note climbed 14 basis points, or 0.14 percentage point, to 3.60 percent this week, according to BGCantor Market Data. The price of the 3.125 percent security maturing in May 2019 tumbled 1 5/32, or $11.56 per $1,000 face amount, to 96 2/32. The yield touched 3.748 percent yesterday, the highest since November.

The dollar has also begun to weaken against the majority of the world’s most actively traded currencies on concern about the value of U.S. assets. The dollar touched $1.4135 per euro today, the weakest level this year.

Bond Intimidation

Ten-year yields climbed from 5.2 percent in October 1993, about a year after Clinton was elected, to just over 8 percent in November 1994. Clinton then adopted policies to reduce the deficit, resulting in sustained economic growth that generated surpluses from his last four budgets and helped push the 10-year yield down to about 4 percent by November 1998.

Clinton political adviser James Carville said at the time that “I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”

The surpluses of the Clinton administration turned into record deficits as George W. Bush ramped up spending, including financing of the wars in Iraq and Afghanistan.

The bond vigilantes are being led by international investors, who own about 51 percent of the $6.36 trillion in marketable Treasuries outstanding, up from 35 percent in 2000, according to data compiled by the Treasury.

New Group

“The vigilante group is different this time around,” said Mark MacQueen, a partner and money manager at Austin, Texas- based Sage Advisory Services Ltd., which oversees $7.5 billion. “It’s major foreign creditors. This whole idea that we need to spend our way out of our problems is being questioned.”

MacQueen, who started in the bond business in 1981 at Merrill Lynch, has been selling Treasuries and moving into corporate and inflation-protected debt for the last few months.

Chinese Premier Wen Jiabao said in March that China was “worried” about its $767.9 billion investment and was looking for government assurances that the value of its holdings would be protected.

The nation bought $5.6 billion in bills and sold $964 million in U.S. notes and bonds in February, according to Treasury data released April 15. It was the first time since November that China purchased more securities due in a year or less than longer-maturity debt.

Obama’s Confidence

Treasury Secretary Timothy Geithner, who will travel to Beijing next week, will encourage China to boost domestic demand and maintain flexible markets, a Treasury spokesman said yesterday.

Obama spokesman Robert Gibbs said the president is confident that his budget and economic plans will cut the deficit and bring down the nation’s debt.

“The president feels very comfortable with the steps that the administration is taking to get our fiscal house in order and understands how important it is for our long-term growth,” Gibbs said.

Investors are also selling Treasuries as the economy shows signs of bottoming and credit and stock markets rebound, lessening the need for the relative safety of government debt. And while yields are rising, they are still below the average of 6.49 percent over the past 25 years.

‘Renewed Appreciation’

The world’s largest economy will begin to expand next quarter, according to 74 percent of economists in a National Association for Business Economics survey released this week. The Standard & Poor’s 500 has risen 34 percent since bottoming on March 9, while the London interbank offered rate, or Libor, that banks say they charge each other for three-month loans, fell to 0.66 percent today from 4.819 percent in October, according to the British Bankers’ Association.

Three-month Treasury bill rates have climbed to 0.13 percent after falling to minus 0.04 percent Dec. 4. That flight to safety helped U.S. debt rally 14 percent in 2008, the best year since gaining 18.5 percent in 1995, Merrill indexes show.

“Yes there’s been a big move, and you can argue the big move is driven by the renewed appreciation of the risks associated with holding long-term Treasury bonds,” said Brad Setser, a fellow for geoeconomics at the Council on Foreign Relations in New York.

Fed officials see several possible explanations for the rise in yields beyond investor concern about inflation. Among them: The supply of Treasuries for sale exceeds the Fed’s $300 billion purchase program, the economic outlook is improving and investors are selling government debt used as a hedge against mortgage securities.


Central bankers want to avoid appearing to react solely to market swings. Bernanke hasn’t formally asked policy makers to consider whether to increase Treasury purchases and may not do so before the Federal Open Market Committee’s next scheduled meeting June 23-24. Officials are confident they can mop up liquidity without gaining additional tools from Congress, such as the ability for the Fed to issue its own debt.

The Fed declined to comment for the story. Bernanke has an opportunity to discuss his views when he testifies June 3 before the House Budget Committee in Washington.

“We have daily reminders from bond vigilantes like Bill Gross about the prospect of losing our AAA rating,” Federal Reserve Bank of Dallas President Richard Fisher said in Washington yesterday. “This cannot be allowed to happen.”

Repair the Damage

The government and Fed are trying to repair the damage from the collapse of the subprime mortgage market in 2007, which caused credit markets to freeze, led to the collapse of Lehman Brothers Holdings Inc. in September and was responsible for $1.47 trillion of writedowns and losses at the world’s largest financial institutions, according to data compiled by Bloomberg.

The initial progress Bernanke made toward reducing the relative cost of credit is in jeopardy of being unwound by the work of the bond vigilantes.

The average rate on a typical 30-year fixed mortgage rose to 5.08 percent this week from 4.85 percent in April, according to North Palm Beach, Florida-based Credit card rates average 10.5 percentage points more than 1-month Libor, up from 7.19 percentage points in October.

“Longer term the danger is that the rise in yields disrupts the recovery or the rise in inflation expectations dislodges the Fed’s current complacency on inflation,” Credit Suisse Group AG interest-rate strategists Dominic Konstam, Carl Lantz and Michael Chang wrote in a May 22 report.

‘It’s Over’


You wanted change, and you got change alright, just look at the staggering figures for the US government debt that appears to not only be out of control, it is being added to weekly though new programs and yet un-announced programs!

And the President was criticizing taxpayers for living it up?

Taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises, a USA TODAY analysis shows.

The 12% rise in red ink in 2008 stems from an explosion of federal borrowing during the recession, plus an aging population driving up the costs of Medicare and Social Security.

That's the biggest leap in the long-term burden on taxpayers since a Medicare prescription drug benefit was added in 2003.

The latest increase raises federal obligations to a record $546,668 per household in 2008, according to the USA TODAY analysis. That's quadruple what the average U.S. household owes for all mortgages, car loans, credit cards and other debt combined.

"We have a huge implicit mortgage on every household in America — except, unlike a real mortgage, it's not backed up by a house," says David Walker, former U.S. comptroller general, the government's top auditor.

USA TODAY used federal data to compute all government liabilities, from Treasury bonds to Medicare to military pensions.

Bottom line: The government took on $6.8 trillion in new obligations in 2008, pushing the total owed to a record $63.8 trillion.

The numbers measure what's needed today — set aside in a lump sum, earning interest — to pay benefits that won't be covered by future taxes.

Congress can reduce or increase the burden by changing laws that determine taxes and benefits for programs such as Medicare and Social Security.

Rep. Jim Cooper, D-Tenn., says exploding debt has focused attention on the government's financial challenges. "More and more, people are worried about our fiscal future," he says.

Key federal obligations:

• Social Security. It will grow by 1 million to 2 million beneficiaries a year from 2008 through 2032, up from 500,000 a year in the 1990s, its actuaries say. Average benefit: $12,089 in 2008.

• Medicare. More than 1 million a year will enroll starting in 2011 when the first Baby Boomer turns 65. Average 2008 benefit: $11,018.

•Retirement programs. Congress has not set aside money to pay military and civil servant pensions or health care for retirees. These unfunded obligations have increased an average of $300 billion a year since 2003 and now stand at $5.3 trillion.

And sadly, this is just the beginning of an unprecedented and unsustainable fiscal disaster that will haunt the country into the next few decades. There is simply no way to pay off this debt.

Look at it this way. If the government was a "consumer" and had this much debt, it would no longer qualify for any loans. So what it will do instead is that it will keep writing the checks with money that it does not have and expects to keep borrowing from the world's investors. Why would an investor buy more of these US bonds or NOTES, if it was clearly evident that they would only be repaid in dollars which would have significantly less value?

Someone in Washington D.C., needs to take that ECONOMICS 101 course to understand the impending catastrophic hyper inflation that all these actions will create.

Think back to the WIEMAR Republic, when the currency became worthless (due to similar problems and hyper inflation), and it took a wheelbarrow full of money to buy a loaf of bread?

Dr. Ellen Hodgson Brown
Featured Writer
Dandelion Salad
May 20, 2009

“It was horrible. Horrible! Like lightning it struck. No one was prepared. The shelves in the grocery stores were empty.You could buy nothing with your paper money.

– Harvard University law professor Friedrich Kessler on on the Weimar Republic hyperinflation (1993 interview)

Some worried commentators are predicting a massive hyperinflation of the sort suffered by Weimar Germany in 1923, when a wheelbarrow full of paper money could barely buy a loaf of bread. An April 29 editorial in the San Francisco Examiner warned:

“With an unprecedented deficit that’s approaching $2 trillion, [the President’s 2010] budget proposal is a surefire prescription for hyperinflation. So every senator and representative who votes for this monster $3.6 trillion budget will be endorsing a spending spree that could very well turn America into the next Weimar Republic.”1

In an investment newsletter called Money Morning on April 9, Martin Hutchinson pointed to disturbing parallels between current government monetary policy and Weimar Germany’s, when 50% of government spending was being funded by seigniorage – merely printing money.2 However, there is something puzzling in his data. He indicates that the British government is already funding more of its budget by seigniorage than Weimar Germany did at the height of its massive hyperinflation; yet the pound is still holding its own, under circumstances said to have caused the complete destruction of the German mark. Something else must have been responsible for the mark’s collapse besides mere money-printing to meet the government’s budget, but what? And are we threatened by the same risk today? Let’s take a closer look at the data.

History Repeats Itself – or Does It?

In his well-researched article, Hutchinson notes that Weimar Germany had been suffering from inflation ever since World War I; but it was in the two year period between 1921 and 1923 that the true “Weimar hyperinflation” occurred. By the time it had ended in November 1923, the mark was worth only one-trillionth of what it had been worth back in 1914. Hutchinson goes on:

“The current policy mix reflects those of Germany during the period between 1919 and 1923. The Weimar government was unwilling to raise taxes to fund post-war reconstruction and war-reparations payments, and so it ran large budget deficits. It kept interest rates far below inflation, expanding money supply rapidly and raising 50% of government spending through seigniorage (printing money and living off the profits from issuing it). . . .

“The really chilling parallel is that the United States, Britain and Japan have now taken to funding their budget deficits through seigniorage. In the United States, the Fed is buying $300 billion worth of U.S. Treasury bonds (T-bonds) over a six-month period, a rate of $600 billion per annum, 15% of federal spending of $4 trillion. In Britain, the Bank of England (BOE) is buying 75 billion pounds of gilts [the British equivalent of U.S. Treasury bonds] over three months. That’s 300 billion pounds per annum, 65% of British government spending of 454 billion pounds. Thus, while the United States is approaching Weimar German policy (50% of spending) quite rapidly, Britain has already overtaken it!”

And that is where the data gets confusing. If Britain is already meeting a larger percentage of its budget deficit by seigniorage than Germany did at the height of its hyperinflation, why is the pound now worth about as much on foreign exchange markets as it was nine years ago, under circumstances said to have driven the mark to a trillionth of its former value in the same period, and most of this in only two years? Meanwhile, the U.S. dollar has actually gotten stronger relative to other currencies since the policy was begun last year of massive “quantitative easing” (today’s euphemism for seigniorage).3 Central banks rather than governments are now doing the printing, but the effect on the money supply should be the same as in the government money-printing schemes of old. The government debt bought by the central banks is never actually paid off but is just rolled over from year to year; and once the new money is in the money supply, it stays there, diluting the value of the currency. So why haven’t our currencies already collapsed to a trillionth of their former value, as happened in Weimar Germany? Indeed, if it were a simple question of supply and demand, a government would have to print a trillion times its earlier money supply to drop its currency by a factor of a trillion; and even the German government isn’t charged with having done that. Something else must have been going on in the Weimar Republic, but what?

Schacht Lets the Cat Out of the Bag

Light is thrown on this mystery by the later writings of Hjalmar Schacht, the currency commissioner for the Weimar Republic. The facts are explored at length in The Lost Science of Money by Stephen Zarlenga, who writes that in Schacht’s 1967 book The Magic of Money, he “let the cat out of the bag, writing in German, with some truly remarkable admissions that shatter the ‘accepted wisdom’ the financial community has promulgated on the German hyperinflation.” What actually drove the wartime inflation into hyperinflation, said Schacht, was speculation by foreign investors, who would bet on the mark’s decreasing value by selling it short.

Short selling is a technique used by investors to try to profit from an asset’s falling price. It involves borrowing the asset and selling it, with the understanding that the asset must later be bought back and returned to the original owner. The speculator is gambling that the price will have dropped in the meantime and he can pocket the difference. Short selling of the German mark was made possible because private banks made massive amounts of currency available for borrowing, marks that were created on demand and lent to investors, returning a profitable interest to the banks.

At first, the speculation was fed by the Reichsbank (the German central bank), which had recently been privatized. But when the Reichsbank could no longer keep up with the voracious demand for marks, other private banks were allowed to create them out of nothing and lend them at interest as well.4

A Story with an Ironic Twist

If Schacht is to be believed, not only did the government not cause the hyperinflation but it was the government that got the situation under control. The Reichsbank was put under strict regulation, and prompt corrective measures were taken to eliminate foreign speculation by eliminating easy access to loans of bank-created money.

More interesting is a little-known sequel to this tale. What allowed Germany to get back on its feet in the 1930s was the very thing today’s commentators are blaming for bringing it down in the 1920s – money issued by seigniorage by the government. Economist Henry C. K. Liu calls this form of financing “sovereign credit.” He writes of Germany’s remarkable transformation:

“The Nazis came to power in Germany in 1933, at a time when its economy was in total collapse, with ruinous war-reparation obligations and zero prospects for foreign investment or credit. Yet through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began.”5

While Hitler clearly deserves the opprobrium heaped on him for his later atrocities, he was enormously popular with his own people, at least for a time. This was evidently because he rescued Germany from the throes of a worldwide depression – and he did it through a plan of public works paid for with currency generated by the government itself. Projects were first earmarked for funding, including flood control, repair of public buildings and private residences, and construction of new buildings, roads, bridges, canals, and port facilities. The projected cost of the various programs was fixed at one billion units of the national currency. One billion non-inflationary bills of exchange called Labor Treasury Certificates were then issued against this cost. Millions of people were put to work on these projects, and the workers were paid with the Treasury Certificates. The workers then spent the certificates on goods and services, creating more jobs for more people. These certificates were not actually debt-free but were issued as bonds, and the government paid interest on them to the bearers. But the certificates circulated as money and were renewable indefinitely, making them a de facto currency; and they avoided the need to borrow from international lenders or to pay off international debts.6 The Treasury Certificates did not trade on foreign currency markets, so they were beyond the reach of the currency speculators. They could not be sold short because there was no one to sell them to, so they retained their value.

Within two years, Germany’s unemployment problem had been solved and the country was back on its feet. It had a solid, stable currency, and no inflation, at a time when millions of people in the United States and other Western countries were still out of work and living on welfare. Germany even managed to restore foreign trade, although it was denied foreign credit and was faced with an economic boycott abroad. It did this by using a barter system: equipment and commodities were exchanged directly with other countries, circumventing the international banks. This system of direct exchange occurred without debt and without trade deficits. Although Germany’s economic experiment was short-lived, it left some lasting monuments to its success, including the famous Autobahn, the world’s first extensive superhighway.7

The Lessons of History: Not Always What They Seem

Germany’s scheme for escaping its crippling debt and reinvigorating a moribund economy was clever, but it was not actually original with the Germans. The notion that a government could fund itself by printing and delivering paper receipts for goods and services received was first devised by the American colonists. Benjamin Franklin credited the remarkable growth and abundance in the colonies, at a time when English workers were suffering the impoverished conditions of the Industrial Revolution, to the colonists’ unique system of government-issued money. In the nineteenth century, Senator Henry Clay called this the “American system,” distinguishing it from the “British system” of privately-issued paper banknotes. After the American Revolution, the American system was replaced in the U.S. with banker-created money; but government-issued money was revived during the Civil War, when Abraham Lincoln funded his government with U.S. Notes or “Greenbacks” issued by the Treasury.

The dramatic difference in the results of Germany’s two money-printing experiments was a direct result of the uses to which the money was put. Price inflation results when “demand” (money) increases more than “supply” (goods and services), driving prices up; and in the experiment of the 1930s, new money was created for the purpose of funding productivity, so supply and demand increased together and prices remained stable. Hitler said, “For every mark issued, we required the equivalent of a mark’s worth of work done, or goods produced.” In the hyperinflationary disaster of 1923, on the other hand, money was printed merely to pay off speculators, causing demand to shoot up while supply remained fixed. The result was not just inflation but hyperinflation, since the speculation went wild, triggering rampant tulip-bubble-style mania and panic.

This was also true in Zimbabwe, a dramatic contemporary example of runaway inflation. The crisis dated back to 2001, when Zimbabwe defaulted on its loans and the IMF refused to make the usual accommodations, including refinancing and loan forgiveness. Apparently, the IMF’s intention was to punish the country for political policies of which it disapproved, including land reform measures that involved reclaiming the lands of wealthy landowners. Zimbabwe’s credit was ruined and it could not get loans elsewhere, so the government resorted to issuing its own national currency and using the money to buy U.S. dollars on the foreign-exchange market. These dollars were then used to pay the IMF and regain the country’s credit rating.8 According to a statement by the Zimbabwe central bank, the hyperinflation was caused by speculators who manipulated the foreign-exchange market, charging exorbitant rates for U.S. dollars, causing a drastic devaluation of the Zimbabwe currency.

The government’s real mistake, however, may have been in playing the IMF’s game at all. Rather than using its national currency to buy foreign fiat money to pay foreign lenders, it could have followed the lead of Abraham Lincoln and the American colonists and issued its own currency to pay for the production of goods and services for its own people. Inflation would then have been avoided, because supply would have kept up with demand; and the currency would have served the local economy rather than being siphoned off by speculators.

The Real Weimar Threat and How It Can Be Avoided

Is the United States, then, out of the hyperinflationary woods with its “quantitative easing” scheme? Maybe, maybe not. To the extent that the newly-created money will be used for real economic development and growth, funding by seigniorage is not likely to inflate prices, because supply and demand will rise together. Using quantitative easing to fund infrastructure and other productive projects, as in President Obama’s stimulus package, could invigorate the economy as promised, producing the sort of abundance reported by Benjamin Franklin in America’s flourishing early years.

There is, however, something else going on today that is disturbingly similar to what triggered the 1923 hyperinflation. As in Weimar Germany, money creation in the U.S. is now being undertaken by a privately-owned central bank, the Federal Reserve; and it is largely being done to settle speculative bets on the books of private banks, without producing anything of value to the economy. As gold investor James Sinclair warned nearly two years ago:

“[T]he real problem is a trembling $20 trillion mountain of over the counter credit and default derivatives. Think deeply about the Weimar Republic case study because every day it looks more and more like a repeat in cause and effect . . . .”9

The $12.9 billion in bailout funds funneled through AIG to pay Goldman Sachs for its highly speculative credit default swaps is just one egregious example.10 To the extent that the money generated by “quantitative easing” is being sucked into the black hole of paying off these speculative derivative bets, we could indeed be on the Weimar road and there is real cause for alarm. We have been led to believe that we must prop up a zombie Wall Street banking behemoth because without it we would have no credit system, but that is not true. There is another viable alternative, and it may prove to be our only viable alternative. Main Street can beat Wall Street at its own game by forming publicly-owned banks that issue the full faith and credit of the United States not for private speculative profit but as a public service, for the benefit of the United States and its people.11

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her earlier books focused on the pharmaceutical cartel that gets its power from “the money trust.” Her eleven books include Forbidden Medicine, Nature’s Pharmacy (co-authored with Dr. Lynne Walker), and The Key to Ultimate Health (co-authored with Dr. Richard Hansen). Her websites are and

1. “Examiner Editorial: Get Ready for Obama’s Coming Hyperinflation,” San Francisco Examiner, April 29, 2009.
2. Martin Hutchinson, “Is It 1932 – or 1923?”, Money Morning (April 9, 2009).
3. See Monthly Average Graphs,
4. Stephen Zarlenga, The Lost Science of Money (Valatie, New York: American Monetary Institute, 2002), pages 590-600; S. Zarlenga, “Germany’s 1923 Hyperinflation: A ‘Private’ Affair,” Barnes Review (July-August 1999).


Did anyone expect a different outcome given that the auto industry group of consultants that the administration sent to work on the GM (Government Motors) deal had never run any auto companies?

Their plan is to build "green" cars powered by THEIR PLAN IS TO BUILD "GREEN" CARS POWERED BY electricity that they do not want the electric companies to produce, nor are these cars that the vast majority of consumers want to buy; safety, cost and utility being the biggest reasons of why not.

As a result of the "great deal" worked out to "save" General Motors, there will be a total wipe out of present stockholders who saw hundreds of billions in stock losses on their stock which will now be "owned" by the US Government (who is that exactly?) and the UAW union and a little sliver owned by existing SUPER SECURED BOND holders who were threatened with various government intervention if they did not agree.

About $5-$8 billion of the bond holders were mostly regular folks who bought the bods for their "safety" as a secured instrument and for their yields so that they may retire, for instance.

Now thanks to government "help", they will be wiped out as secured creditors who had every right to get their full cash, and instead will receive some sliver of common stock ownership in the new mostly Chinese, GM.

There will also be no GM Europe, the other place that GM should be selling cars if it is to be a global player, but that will be sold.

The unsecured UAW members will get more than they will!

There is a revised wage deal for the UAW members, but it did nothing to reduce the wages and costs to GM, so what is the point of all this monkey business?

As to how effective will be the government "help", try to remember the last $80 billion that it spent to rebuild New Orleans!

Now they are spending an even more enormous sum of unrestricted TAXPAYER funds while shafting secured holders, the little people who held GM bonds.

I would not want to buy the new stock of GM, if for no other reason than to demonstrate its illegitimacy as a ethical corporation. But then again it is run by the ethical folks in Washington.

Magna 'agrees to buy GM Europe'
Magna must still get German government clearance for the deal

Canadian-Austrian car parts maker Magna International has reached an agreement in principle to rescue GM Europe, owner of Opel and Vauxhall, reports say.

The agreement was reached with General Motors, but will need to be approved by the German government, which will be providing funding to the new owner.

The other potential bidder, Fiat, said it would not be attending Friday's talks with the German government.

GM in the US is expected to declare Chapter 11 bankruptcy on Monday.

There is due to be a meeting in Berlin at 1800 local time (1600 GMT) attended by Chancellor Angela Merkel, the ministers involved and officials from the German states that contain GM plants to discuss whether to approve the deal.

Extra funding

Magna and GM will not be attending the meeting at first, although they may be invited later.

There have been suggestions in the German media that it may be cheaper for the German government to allow GM Europe to declare itself insolvent than to allow it to be bought.

On Thursday, the German government criticised the US Treasury and General Motors after being told at the last minute that GM Europe would need another 300m euros ($415m; £260m) in short-term funding.

It has already offered almost 1.4bn euros in loan guarantees.

Magna and GM will also have to make sure that GM Europe is restructured in a way that will protect the carmaker if, as expected, its parent company in the US declares itself bankrupt which it is expected to file on Monday.

General Motors Corp. fell below $1, the minimum price normally needed to trade on the New York Stock Exchange, as the automaker headed for bankruptcy.

The world’s largest automaker until its 77-year reign ended in 2008 plans to file for Chapter 11 protection on June 1 and sell most of its assets to a new company, according to people familiar with the matter.


Savor those full-sized trucks while you can.

I'm driving the new version of the Ford F-150 pick-up truck this week, and I'm getting angry all over again at the Washington know-it-alls who insist that this isn't the type of vehicle Americans want to drive.

This is the archetypical American vehicle, which is why it's been among the top-selling models for going on 20 years.

Both powerful and comfortable, the new F-150, like its predecessors, is suitable for those who "need" a truck as well as for those like me who simply love driving them. But in a few years, I doubt I'll have that option. President Barack Obama's new emissions and mileage standards will likely put an end to pick-up trucks for everyday drivers.

I'm thinking about packing one of these babies away in mothballs as an investment. When the only choice Americans have in showrooms are the mini-cars that ought to come with a coffin, I'm betting a vintage full-sized pickup will be worth its weight in gold.

Nolan Finley-Detroit News


Can you believe it, the change we can believe in relates apparently to the closings of Chrysler car dealerships who were donors to the Republican party or candidates!

So not only is the government taking over and muscling its way into Chrysler, but it is targeting as its "enemies" targeting for closing dealers who were active donors to republican candidates.

This is not the promise of the new administration to create and save jobs, or is it their way of saying " We are creating and saving jobs at Chrysler dealerships who support us and getting rid of the others- net gain zero, as the other dealers will replace the closed dealers."

Nice, create or save jobs, the new administration's way. Looking back into history, we need to review the 1930's as a new Chancellor was "elected" in Germany, and created new jobs there for his supporters too.

Furor grows over partisan car dealer closings
Mark Tapscott

Evidence appears to be mounting that the Obama administration has systematically targeted for closing Chrysler dealers who contributed to Republicans. What started earlier this week as mainly a rumbling on the Right side of the Blogosphere has gathered some steam today with revelations that among the dealers being shut down are a GOP congressman and closing of competitors to a dealership chain partly owned by former Clinton White House chief of staff Mack McLarty.

The basic issue raised here is this: How do we account for the fact millions of dollars were contributed to GOP candidates by Chrysler who are being closed by the government, but only one has been found so far that is being closed that contributed to the Obama campaign in 2008?

Florida Rep. Vern Buchanan learned from a House colleague that his Venice, Florida, dealership is on the hit list. Buchanan also has a Nissan franchise paired with the Chrysler facility in Venice.

"It's an outrage. It's not about me. I'm going to be fine," said Buchanan, the dealership's majority owner. "You're talking over 100,000 jobs. We're supposed to be in the business of creating jobs, not killing jobs," Buchanan told News 10, a local Florida television station.

Buchanan, who succeeded former Rep. Katharine Harris in 2006, reportedly learned of his dealership's termination from Rep.Candace Miller, R-MI. Buchanan owns a total of 23 dealerships in Florida and North Carolina.

Also fueling the controversy is the fact the RLJ-McCarty-Landers chain of Arkansas and Missouri dealerships aren't being closed, but many of their local competitors are being eliminated. Go here for a detailed look at this situation. McClarty is the former Clinton senior aide. The "J" is Robert Johnson, founder of the Black Entertainment Television, a heavy Democratic contributor.

A lawyer representing a group of Chrysler dealers who are on the hit list deposed senior Chrysler executives and later told Reuters that he believes the closings have been forced on the company by the White House.

"It became clear to us that Chrysler does not see the wisdom of terminating 25 percent of its dealers. It really wasn't Chrysler's decision. They are under enormous pressure from the President's automotive task force," said attorney Leonard Bellavia.'s Josh Painter has a useful roundup of what has been found so far by a growing number of bloggers digging into what could be a very big story indeed. Also, see my column on this issue and how it fits into the larger context dubbed by the Examiner's Michael Barone as "gangster government."

As part of Chrysler's bankruptcy agreement with the White House, the company plans to close roughly a quarter of its 3,200 dealerships. Lists of the dealerships being cut and those retaining their Chrysler franchises can be found here in pdf format. Many dealers contend the criteria being used to determine which dealerships survive is not clear and that many of those that are being closed in fact are profitable businesses, despite the current recession.



All people will become poorer due to the proposal of a VAT tax. Now keep in in mind that this is NOT the "fair tax" you may have seen advocated over the years; instead it is a regressive stealing of your money and provides a stifling amount of new costs to every single item you buy, use or acquire.

This new administration is hell bent on adopting the failed national models of Europe and some 143 countries have some sort of VAT (similar to sales tax but for the Federal government) and will propose to add a national TAX of 10% to everything you buy! In addition, this VAT tax is added to every purchase a manufacturer makes to buy the raw materials he uses, the producer of the raw material pays for everything he buys, and so on, and so on.


For instance, say that you are now a manufacturer of little plastic parts for some gadget that sells for $1 wholesale, to a retail chain like WAL-MART, who then marks it up to $1.97 for retail sale.

If the VAT tax was put into place, the company making the chemical plastic would then sell its $.25 product to the manufacturer for $.25 PLUS $.025 VAT so it would now cost the manufacturer $.275. Then the trucking company would charge VAT to their invoice, then the gasoline distributor charging the trucker to fill up would add his VAT, and then the independent owner operator would add his VAT to his bill to the trucking company, the manufacturer of the invoices that are used by all the suppliers would add VAT to their bills, and then even buying stamps to put on the invoices at the post office would have VAT added as well.


Are you starting to see this catastrophe in the making?

Remember, the local sales taxes would not go away as they are the mainstay for the state governments and local governments now too.

Did anyone remember voting for this change?

There will be no economic recovery possible due to such a crazy idea, and it will actually stifle any upswing in the economic cycle.

On a day of mind-numbing acronyms that few aside from tax preparers can decipher without IRS instructions, we should note one that could mark the way to tax system salvation. It’s spelled V-A-T.

Currently, 143 countries levy some form of a value-added tax, or VAT, on goods and services. The United States is the only OECD country without one. In the European Union, VAT is the gold standard for funneling revenue to the federal level. The slippery socialists in France are able to fund 45% of the French state through VAT. The sales tax common in most U.S. states is similar to VAT, but it only goes toward state expenses.

One of the more viable proposals for an American version of the VAT comes from Yale University Professor, Michael Graetz. He proposes a 10-14 percent VAT in the US, versus the 19-25 percent required in Europe. This would generate enough revenue to allow the direct elimination of 100 million income tax returns. Coupled with a new maximum income tax rate of 25% on the wealthiest and a corporate rate of 15%, it could pave the way to much-needed solvency while simplifying a tax system mired in superfluous paperwork, loopholes and inefficiencies.

Graetz told Big Think today, “it is abundantly clear that we don’t have a system that is well-positioned to raise the needed revenue.”

On the relevance of VAT for the U.S., Graetz said an economic system as interconnected as the world’s is today should have some complementary tax features.

His proposal, elaborated in 100 Million Unnecessary Returns: A Fair, Simple, and Competitive Tax Plan For The United States, is getting more traction in Washington, though Obama is not expected to enact any sweeping tax reforms until 2010 at the earliest

If simplifying a byzantine tax system—one that swallows 7.6 billion work hours per year—was not sufficient reason to consider a VAT proposal, consider a simple projection. At the current rate of national debt, the share of the U.S. GDP comprised of debt obligations is forecasted to jump to 80%. Such a figure would bar a country from membership in the OECD, European Community or any other recognized transnational economic union: in short, a banana republic.


Send emails, send letters make the phone calls. Be heard, be loud, it's YOUR MONEY!



As the Annual Meeting season rolls around, gadflies, activists and wackos of every type start to attend the meetings too. Over my lifetime I have seen it all at the meetings. It was not unusual for a certain gadfly to appear and always owning one share or a token 10 shares wanting all types of resolutions adopted.

That was really irksome. We wanted as stockholders to find out how our company was doing, how much money we could expect as profits next year and hear about its prospects, but had to put up with this token idiot stockholder who wanted a resolution to stop the company from chopping down a tree, for instance.

For goodness sake, moron, it's a forestry company. What do you want them to do, take pictures of the trees?

Today it is a bit better, but still activists want EXXON to get out of the oil business. Why the heck did they buy any stock then?

Why don't they just buy some stock that they like in a business that pleases them?

It is really frustrating that a relative of J.D. Rockefeller who founded the company now wants it to figure out what will be the next fuel. THEY ARE DOING THAT, CARY WOMAN. What do you think that the Chairman of Exxon does not want to have the company be in some sort of business after OIL ?

EXXON just reported record profits, so what's wrong with that? Is that not what you want the company you own any stock in to be doing?

Here is what happened at the Annual Meeting:

Activists grilled Exxon Mobil Corp.'s CEO Wednesday on environmental issues and his compensation package, but shareholders stood behind management that delivered the biggest profit ever for a U.S. company last year.

Shareholders voted down all 11 resolutions at the company's annual meeting, which was a toned-down affair compared with protest-filled gatherings of recent years.

Chairman and Chief Executive Rex W. Tillerson defended the company's record on climate change, which many scientists blame on burning oil and other fuels. He said oil and gas will continue to be the world's dominant fuels until at least 2030, meeting nearly two-thirds of world demand.

Exxon Mobil earned $45.2 billion last year, as oil prices climbed to record highs near $150 a barrel. Exxon's profit began to fall late in the year as oil prices plunged, and earnings in the first three months of 2009 fell 58 percent from a year earlier.

Despite the worldwide economic slowdown, oil prices have been creeping back up for several weeks -- an increase that Tillerson said couldn't be explained by any changes in supply and demand.

"There has really been no substantial change in demand; there's been little to no change in inventories ... so why the $10 (per barrel) run-up in the last month?" Tillerson asked reporters after the meeting. He said the price increase seemed a reaction to a weak dollar and speculation.

Crude, which opened the month below $52 per barrel on the New York Mercantile Exchange, rose above $63 on Wednesday.

Most of the shareholders who sponsored resolutions were more interested in environmental and executive pay issues.

Activists praised rival Chevron Corp. for its efforts to track and report on the carbon content of its products and challenged Exxon to do the same.

Patricia Daly of faith-based institutional investor the Sisters of St. Dominic in Caldwell, N.J., said Chevron showed good faith and was preparing for a future in which carbon emissions will be more tightly regulated. At Exxon Mobil, she said, "I'm not confident yet that we're ready."

Ann Rockefeller Roberts, a descendant of John D. Rockefeller, who built the company that became Exxon, proposed that the company study the likely effects of climate change through 2030. She said unless the company increased its focus on renewable energy, it would eventually suffer financially.

Tillerson said the company was investing in research by its own scientists and others into the cause and effects of climate change, which he called "a serious risk-management issue."

Other shareholder resolutions called for splitting the duties of chairman and CEO, and several focused on executive compensation. Some speakers raged at Tillerson's 2008 compensation package, which was worth $23.9 million, according to an analysis by The Associated Press.

Mari Mather of Massachusetts-based NorthStar Asset Management Inc., said if Tillerson retires at age 65 he could leave with a package worth $670 million including stock options. To that, Tillerson chuckled, and there was scattered applause from shareholders meeting inside a massive symphony hall.

Only two shareholder resolutions -- letting shareholders cast a nonbinding vote on executive pay every year, and making it easier for shareholders to call a special meeting -- got more than 40 percent support.

In his state-of-the-company address to open the meeting, Tillerson said Exxon Mobil was investing carefully in new oil and gas projects -- it plans to boost capital spending this year to $29 billion from about $26 billion last year.

Tillerson said demand for oil and gas will grow through 2030 as the world's population grows and developing countries become more affluent, with more drivers. Exxon will need those markets to offset slow growth in the U.S. and Europe.

Tillerson said after the meeting that gasoline used for vehicles in the U.S. may have peaked last year.

"We do think motor gasoline demand has by and large peaked in the United States and will likely continue a rather slow and steady decline in the years ahead" as cars become more efficient and more Americans buy hybrids, he said.

Falling gasoline demand will lead to fewer refineries -- "there are some marginal refiners in the U.S. that probably will not survive," Tillerson said. He said Exxon doesn't see any need for new U.S. refineries and will continue to rework it existing facilities.

Let the companies run their business, do they not have enough government intervention and meddling already?


I remember the day of the opening of the first ENCLOSED SHOPPING MALL and the largest in America as it opened in 1968 in Lombard, IL: YORKTOWN CENTER. What a fantastic creation it was, and the traffic to get there required police to direct it as well, as no less than an hour or two to wait to get there due to the inability of the local roads to accommodate the traffic.

I was just 16 later that year, and a friend who was slightly older had an actual working car that he purchased for $300 and drove us all there every Friday night to see the fantasy world of 180 different stores on no less than two levels, and lot's of girls who wanted to shop there incessantly.

It was a chick magnet but also a place to be able to buy anything at one location in the air conditioned comfort of 72 temperature year round. It was very much like those teenager high school movies with kids hanging out at the MALL and then going to the movies.

On it's perimeter was also a movie theater complex as well, with something new MULTIPLE SCREENS at one place, wow, what an invention!

This mall was so popular from its first day that imitators quickly sprang up and it was no loner the largest soon, but still retained its popularity as its surrounding area grew in population and surrounding stores expanded its retail offerings.

The mall had stores that existed only back then and over the years became a casualty of the retail closings: WIEBOLT STORES was an anchor, and a Chicago fixture since 1907; MONTGOMERY WARDS, a national chain based in Chicago, MADIGANS, similar to the Kohl's business model (the Kohl's stores were started from a chain just outside the mall called MAIN STREET); HERMANS WORLD OF SPORTING GOODS, a gigantic chain of sporting goods stores, and CHARLES A. STEVENS which advertised "whare the models buy their clothes".

What memories...

Now the Mall has gone through several remodelings and reburbishments, and the WIEBOLDT STORE was vacant for 7 years, being remodeled into the largest VON MAUR department store in the country. Von Maur is a great old line and old fashioned service specialty department store chain, that remionds you of the good old days of merchandising. The others now long gone were converted into expanded food courts, etc.

Now the statistics are showing the the MALL shopping experience is on a decline with so many big box stores drawing traffic from them, and typically being discounters, drawing away from the retail margins experienced by the mall stores.

Withe the proliferation of local shopping centers, high fule prices and less time to shop, consumers are changing their shopping destinations just enough to change the landscape of the MALL SHOPPING EXPERIENCE.

Personally, I miss that experience, and long for the good old days.
Malls, those ubiquitous shopping meccas that sprang up in the 1950s, are dwindling in number, with many struggling properties reduced to largely vacant shells.

On the low-income east side of Charlotte, N.C., the 1.1-million-square-foot Eastland Mall recently lost a slew of key tenants, including a Dillard's and, next month, a Sears. Sales per square foot at the venue fell to $210 in 2008 from $288 in 2001.

Death of an American Mall

Andy McMillan for The Wall Street Journal

As the recession alters American spending habits, traditional shopping malls like Eastland Mall are deteriorating at an accelerating pace.

The Metcalf South Shopping Center in Overland Park, Kan., is languishing after plans to redevelop it into an open-air shopping district fizzled. The stretch of shops that connects the two largest tenants -- a Sears and a Macy's -- stands mostly vacant, patrolled by security guards.

With their maze of walkways and fast-food courts, malls have long been an iconic, if sometimes unsightly, presence in the American retail landscape. A few were made famous by their sheer size, others for the range of shopping and social diversions they provided.

But the long recession is helping to empty out the promenades. Some analysts estimate that the number of so-called "dead malls" -- centers debilitated by anemic sales and high vacancy rates -- will swell to more than 100 by the end of this year.

In the 12 months ended March 31, U.S. malls collectively posted a 6.5% decline in tenants' same-store sales, according to Green Street Advisors Inc., a real-estate research firm. The recent slump was led by an average 7.3% sales drop at Simon Property Group Inc., the operator with the largest number of mall locations.

The industry's woes are worsening. Thinning customer traffic, and subsequent hits to tenants' sales and profits, prompted Standard & Poor's Corp. last month to lower the credit ratings of the department-store sector. That knocked Macy's Inc. and J.C. Penney Co. into junk territory and pushed others deeper into junk. Sears Holdings Corp., a cornerstone tenant at many malls, is expected to close 23 stores this month and next.

General Growth Properties, which owns more than 200 U.S. malls, filed for bankruptcy protection April 16, due mainly to its failure to refinance billions of dollars of debt coming due. While the real-estate investment trust has said the filing will have no impact on its mall business, analysts say a prolonged bankruptcy proceeding could make retailers nervous about sticking around once their leases expire.

The severity of the recession is turning some malls that were once viewed as viable into potential casualties. "Any mall that's sitting on life support is probably going to get its plug pulled" as the economy stalls, says Michael Glimcher, chairman and CEO of Glimcher Realty Trust, which owns 23 U.S. properties, including Eastland Mall in Charlotte.

[dead mall map]

See 84 malls in danger of closing.

How the U.S. Got Malled

Look back at the American mall's rise to prominence and recent woes.

One industry rule of thumb holds that any large, enclosed mall generating sales per square foot of $250 or less -- the U.S. average is $381 -- is in danger of failure. By that measure, Eastland is one of 84 dead malls in a 1,032-mall database compiled by Green Street. (The database focuses heavily on malls owned by publicly traded landlords and doesn't account for several dozen failing malls in private hands.) If retail sales continue to decline at current rates, the dead-mall roster could exceed 100 properties by the end of this year, according to Green Street. That's up from an estimated 40 failing malls in 2006, before the recession began.

"This time around, because of the dramatic changes in consumer spending practices, we're very likely to see more malls in the death spiral than we've ever seen before," says Green Street analyst Jim Sullivan.

Failing malls didn't get into trouble overnight, and most began their descent long before the tough climate. Typically, a mall begins to suffer due to job losses and other pressures in the surrounding neighborhood or because a newer mall opens nearby. The loss of key tenants -- such as the wave of department-store closures over the past three years -- hastens the demise. Also sapping malls' vibrancy: the increased preference among consumers for big-box stores, such as Wal-Mart Stores Inc. and Target Corp., which rarely operate in malls.

Developers, in fact, have been moving away from the enclosed-mall format in favor of big-box centers anchored by free-standing giants such as Wal-Mart or open-air shopping centers with tiny parks and outdoor cafes sprinkled among fashion stores. Only one enclosed mall has opened in the U.S. since 2006: The Mall at Turtle Creek in Jonesboro, Ark.

These pressures, coupled with landlords' difficulties refinancing debts in the bone-dry capital markets, signal tough years ahead for retail-property owners -- even after consumer spending begins to rebound. "The shopping-center bankruptcies and the REIT bankruptcies are the ticking time bomb that people aren't talking about," says Burt P. Flickinger III, managing director of Strategic Resource Group, a research firm.

Four months ago, executives at J.C. Penney headquarters in Plano, Texas, called a "triage" meeting to discuss a recent study of the financial condition and health of the 550 malls housing Penney stores. The study's conclusion: 15 of its stores are located in malls at risk of failure.

"We started to see things heading south," says Penney CEO Myron "Mike" Ullman III. It was important, he notes, to "get ahead of this" mall problem by reviewing Penney's new store strategy to determine whether it might relocate existing mall stores. Over the past 18 months, Penney's weekly sales have been trending better at stand-alone stores that aren't attached to traditional malls.

Faison Enterprises Inc.

Shoppers watched ice skaters on the central ice rink of Eastland Mall when the Charlotte mall opened in 1975. The ice rink closed last year, along with several of Eastland's stores.

Dead Mall

Hundreds of other anchor stores -- generally two- and three-story department stores that drive mall momentum -- are pulling out of properties. Several anchor chains, including Gottschalks Inc., Goody's Family Clothing Inc. and Boscov's Department Store LLC, filed for bankruptcy protection in recent months. Goody's ended up liquidating its 282 stores, as Gottschalks is now doing with its 58. Boscov's closed 10 locations. As mall-based chains face the prospect of a much smaller market, more closures are likely. So far for 2009, monthly sales declines at upscale retailers such as Saks Inc., Nordstrom Inc. and Neiman Marcus Group have registered mostly in the double digits, compared with results a year ago.

Saks CEO Stephen Sadove is talking with mall owners about closing a few of the retailer's 53 Saks Fifth Avenue stores. "You have to ask yourself: Do you believe the prospects for a given store or mall are going to be positive? Can you make money over the long term?" he says.

For towns and cities that are home to dying malls, the fallout can be devastating. Malls hire hundreds of workers and are significant contributors to the local tax base. In suburbs and small towns, malls often are the only major public spaces and the safest venues for teenagers to shop, hang out and seek part-time work.

Commonly, "the mall will be a meeting place, or, in some cases, like a city center," says Carl Steidtmann, chief economist at Deloitte LLP. The deterioration of a mall can spawn broader problems, he notes. "It can become a crime magnet."

The gradual fade-out of marginal malls has prompted a thriving Web culture dedicated to sharing information about dead or dying properties. Sites such as, and are drawing traffic from mall employees, shoppers and other mall mourners who swap stories, photos and predictions about the status of centers on their way out.

[Recession Turns Malls Into Ghost Towns]

"So sad!" wrote Edith Schilla, 45 years old, of Independence, Ohio, in an April 3 posting on following her visit to a Sears liquidation sale at the Randall Park Mall in North Randall, Ohio. "I was able to peek into the mall and was so overtaken by the vast emptiness," she wrote, recalling it as previously "so busy."

After the Sears closes next month, Randall Park will be left with only a few remaining tenants, including an Ohio Technical College automotive school. It currently has the most popular page on, which so far this year has a 25% increase in postings on its "dead malls" category. Mall owner Whichard Real Estate LLC is trying to sell the property, which likely needs to be torn down and rebuilt into something else, says Whichard asset manager Kenneth Whichard. Local officials, meanwhile, want to fill the mall with education and industrial tenants.

During past economic cycles, dead malls were frequently redeveloped into mixed-use space that includes apartments, offices or parks. Repurposing mall space today will be more difficult. Lenders and investors are moving away from commercial real estate as property values decline and delinquencies rise on debt used to acquire or develop properties. Retail real estate has been hit especially hard, as declining retail sales and store closures hammer mall landlords.

In Charlotte, Eastland's deterioration into a dead mall matches the fate of many others across the U.S.

Faison Enterprises Inc. opened Eastland in 1975 as the city's second regional mall. Shoppers crowded four-deep around its skating rink to see local dignitaries kneel gingerly on the ice as a Presbyterian minister blessed the structure with prayers. In the early years, shoppers flocked to the mall's Miller & Rhoads and Ivey's department stores, among others.

"It was just a great place to go and be seen," said Mary Kate Cline, a 51-year-old who frequented the mall in its early years but can't recall the last time she entered it.

Eastland's reign lasted roughly two decades. Its market began to erode when the area around Eastland fostered low-income housing. Meanwhile, the Charlotte area's more affluent residents and new arrivals gravitated to suburbs on the city's north and south ends. Developers built and renovated malls in those suburbs, drawing shoppers away from Eastland. In recent years, discount stores such as Wal-Mart and midtier Kohl's Corp. sprung up near Eastland, siphoning off more of its shoppers.

A string of major store exits at Eastland began with Penney's departure in 2002. Belk Inc. closed in 2007, along with several national specialty stores. The closures gained momentum amid the recession last year, when stores including New York & Co., Genesco Inc.'s Journeys, Finish Line Inc. and Dillard's Inc. pulled out, leaving behind empty, gated storefronts.

A handful of retail holdouts -- stores for Footlocker Inc., Burlington Coat Factory Inc. and several local merchants, many paying reduced rents -- are reluctant to leave, even as sales dwindle. "I've made my business here," Luz Pavas said, while manning her kiosk of health and beauty aids. "I don't want to move to another mall. I want Eastland Mall to be like it was eight years ago."

Boarded-up stores near the mall languish as reminders of departed retailers, including Mega Food Market, Uptons department store and Harris Teeter Inc. Neighbors and community leaders want Eastland razed and replaced with developments such as upscale housing to attract a new demographic.

But the mall's current owner, Glimcher Realty Trust, the Columbus, Ohio-based owner of 23 malls, is keen to sell Eastland rather than spend the hefty sums needed to redevelop it. A better investment, says the company, "would be to put money into assets that were doing well," according to Glimcher spokeswoman Lisa Indest.

Charlotte city officials have lined up resources to help reinvent the mall, including $20 million in public financing. They acknowledge that finding a developer willing to underwrite the additional $180 million needed to turn Eastland into a mix of housing, shops and parks will be tough.

"No one's kidding themselves that this is an easy real-estate deal," says Charlotte City Councilman John Lassiter. "It wasn't easy when the market was good. Now it's much harder."


The banking business always had a certain level of stuffy snobby attitude. I remember taking the commuter train into the downtown terminal and all the "bankers" were always on the 9:11 am arrival train. Going back home they were on the 4:44 train.

Bankers hours, not bad.

The complicated world of banking and bankers with all the derivatives, and new fangled financial instruments came to daylight during the various "too big to fail" scenarios, with government bailouts being synonymous with the banking business.

Everyone is still wondering why with all the money the government has thrown out with TARP funds and other loans, as well as banks being able to essentially borrow from the TREASURY at ZERO interest, why are they NOT LENDING?

That's an easy question.

The banks can borrow money at ZERO from the (US TAXPAYERS AND THE TREASURY), and THEN USE IT TO BUY treasury SECURITIES THAT PAY 3%, WITH NO RISK. THIS IS A NO RISK SPREAD for the bank, so why should it make risky loans to shaky businesses?

Nobody can blame them, the government as usual by interceding in the markets has caused anomalies by its actions, none of which have any benefit for borrowers.

In fact, the news is widely disseminated that tends to forecast worsening financial conditions for businesses, so why risk loan money?

Big banks have raised billions since the stress tests and policymakers are now turning their bailout affections to life insurers and automakers. Is the government trying to tell us the crisis in the financial sector is over?

While it's too soon to say they're out of the woods, "the government has set up a situation where the banks can hardly lose," says James Galbraith, economist, professor and author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too.

Beyond the TARP funds - which Galbraith calls an "unproductive use of Federal borrowing" - banks are benefiting from lending programs that effectively allow them to borrow at zero and reinvest in Treasuries at around 3%. ( I TOLD YOU SO)"A bank doesn't have to do anything to make money," he says. "The banks' return on equity is going to be very good. They're going to be able to restore their finances."

While this is good for banks and a justification for the sector's recent rally, the problem is the government's "free money" program means banks have little or no incentive to do any actual lending. Combined with rising unemployment and the ongoing housing crisis, this means any recovery is likely to be muted, at best, Galbraith says. Furthermore, anyone hoping for a return anytime soon to the salad days of the mid-2000s is delusional.

So now what, do we buy bank stocks?


HYBRIDS, alternative energy cars, electric cars, air powered cars, micro-cars, gas saving cars-are all the rage. But I ask why? Why buy a puny no-power car?

Oil has been put on the earth to be used by humans until it is all gone. Then we humans will invent or come up with ways to next use the sand, rocks, trees, owls, polar bears, seals, flatulence or whatever is still here then, to power our cars; our large, very large cars.

WE WANT LARGE CARS and large trucks; the larger the better.

Large vehicles are safer, they are intimidating to other drivers, and they can run over puny cars like the Insight the Yaris, Prius, the Tweety Bird, the Lady Bug, and various minis, that just are blocking the roadway which was built for BIG vehicles.

We even hate the names of the hybrids. We like BIG names like EXCURSION, EXPEDITION, RAM, TUNDRA, F-350, HUMMER-they have a nice BIG sound.


Why do we have to try and fit into teeny tiny cars, especially since the average American is now the size of a small Mack truck?

Is the President going to change his limousine to a Prius, or one of those 3 wheel French cars?

Let's agree, whatever car the president drives or is driven in, shall be the car we all seek to have too!

Also, have we forgotten about the atomic powered cars that were considered possible future cars in the 1950's, they would be really efficient. I believe that there would be only a once in a lifetime fill-up of uranium, or protons or neutrons or something like that, or once every 100,000 miles.

Much has been written about the Insight, Honda’s new low-priced hybrid. We’ve been told how much carbon dioxide it produces, how its dashboard encourages frugal driving by glowing green when you’re easy on the throttle and how it is the dawn of all things. The beginning of days.

So far, though, you have not been told what it’s like as a car; as a tool for moving you, your friends and your things from place to place.

So here goes. It’s terrible. Biblically terrible. Possibly the worst new car money can buy. It’s the first car I’ve ever considered crashing into a tree, on purpose, so I didn’t have to drive it any more.

The biggest problem, and it’s taken me a while to work this out, because all the other problems are so vast and so cancerous, is the gearbox. For reasons known only to itself, Honda has fitted the Insight with something called constantly variable transmission (CVT).

It doesn’t work. Put your foot down in a normal car and the revs climb in tandem with the speed. In a CVT car, the revs spool up quickly and then the speed rises to match them. It feels like the clutch is slipping. It feels horrid.

And the sound is worse. The Honda’s petrol engine is a much-shaved, built-for-economy, low-friction 1.3 that, at full chat, makes a noise worse than someone else’s crying baby on an airliner. It’s worse than the sound of your parachute failing to open. Really, to get an idea of how awful it is, you’d have to sit a dog on a ham slicer.

So you’re sitting there with the engine screaming its head off, and your ears bleeding, and you’re doing only 23mph because that’s about the top speed, and you’re thinking things can’t get any worse, and then they do because you run over a small piece of grit.

Because the Honda has two motors, one that runs on petrol and one that runs on batteries, it is more expensive to make than a car that has one. But since the whole point of this car is that it could be sold for less than Toyota’s Smugmobile, the engineers have plainly peeled the suspension components to the bone. The result is a ride that beggars belief.

There’s more. Normally, Hondas feel as though they have been screwed together by eye surgeons. This one, however, feels as if it’s been made from steel so thin, you could read through it. And the seats, finished in pleblon, are designed specifically, it seems, to ruin your skeleton. This is hairy-shirted eco-ism at its very worst.

However, as a result of all this, prices start at £15,490 — that’s £3,000 or so less than the cost of the Prius. But at least with the Toyota there is no indication that you’re driving a car with two motors. In the Insight you are constantly reminded, not only by the idiotic dashboard, which shows leaves growing on a tree when you ease off the throttle (pass the sick bucket), but by the noise and the ride and the seats. And also by the hybrid system Honda has fitted.

In a Prius the electric motor can, though almost never does, power the car on its own. In the Honda the electric motor is designed to “assist” the petrol engine, providing more get-up-and-go when the need arises. The net result is this: in a Prius the transformation from electricity to petrol is subtle. In the Honda there are all sorts of jerks and clunks.

And for what? For sure, you could get 60 or more mpg if you were careful. And that’s not bad for a spacious five-door hatchback. But for the same money

you could have a Golf diesel, which

will be even more economical. And hasn’t been built out of rice paper to keep costs down.

Of course, I am well aware that there are a great many people in the world who believe that the burning of fossil fuels will one day kill all the Dutch and that something must be done.

They will see the poor ride, the woeful performance, the awful noise and the spine-bending seats as a price worth paying. But what about the eco-cost of building the car in the first place?

Honda has produced a graph that seems to suggest that making the Insight is only marginally more energy-hungry than making a normal car. And that the slight difference is more than negated by the resultant fuel savings.

Hmmm. I would not accuse Honda of telling porkies. That would be foolish. But I cannot see how making a car with two motors costs the same in terms of resources as making a car with one.

The nickel for the battery has to come from somewhere. Canada, usually. It has to be shipped to Japan, not on a sailing boat, I presume. And then it must be converted, not in a tree house, into a battery, and then that battery must be transported, not on an ox cart, to the Insight production plant in Suzuka. And then the finished car has to be shipped, not by Thor Heyerdahl, to Britain, where it can be transported, not by wind, to the home of a man with a beard who thinks he’s doing the world a favour.

Why doesn’t he just buy a Range Rover, which is made from local components, just down the road? No, really — weird-beards buy locally produced meat and vegetables for eco-reasons. So why not apply the same logic to cars?

At this point you will probably dismiss what I’m saying as the rantings of a petrolhead, and think that I have my head in the sand.

That’s not true. While I have yet to be convinced that man’s 3% contribution to the planet’s greenhouse gases affects the climate, I do recognise that oil is a finite resource and that as it becomes more scarce, the political ramifications could well be dire. I therefore absolutely accept the urgent need for alternative fuels.

But let me be clear that hybrid cars are designed solely to milk the guilt genes of the smug and the foolish. And that pure electric cars, such as the G-Wiz and the Tesla, don’t work at all because they are just too inconvenient.

Since about 1917 the car industry has not had a technological revolution — unlike, say, the world of communications or film. There has never been a 3G moment at Peugeot nor a need to embrace DVD at Nissan. There has been no VHS/Betamax battle between Fiat and Renault.

Car makers, then, have had nearly a century to develop and hone the principles of suck, squeeze, bang, blow. And they have become very good at it.

But now comes the need to throw away the heart of the beast, the internal combustion engine, and start again. And, critically, the first of the new cars with their new power systems must be better than the last of the old ones. Or no one will buy them. That’s a tall order. That’s like dragging Didier Drogba onto a cricket pitch and expecting him to be better than Ian Botham.

And here’s the kicker. That’s exactly what Honda has done with its other eco-car, the Clarity. Instead of using a petrol engine to charge up the electric motor’s batteries, as happens on the Insight, the Clarity uses hydrogen: the most abundant gas in the universe.

The only waste product is water. The car feels like a car. And, best of all, the power it produces is so enormous, it can be used by day to get you to 120mph and by night to run all the electrical appliances in your house. This is not science fiction. There is a fleet of Claritys running around California right now.

There are problems to be overcome. Making hydrogen is a fuel-hungry process, and there is no infrastructure. But Alexander Fleming didn’t look at his mould and think, “Oh dear, no one will put that in their mouth”, and give up.

I would have hoped, therefore, that Honda had diverted every penny it had into making hydrogen work rather than stopping off on the way to make a half-arsed halfway house for fools and madmen.

The only hope I have is that there are enough fools and madmen out there who will buy an Insight to look sanctimonious outside the school gates. And that the cash this generates can be used to develop something a bit more constructive.