By asking member banks to pay for multiple years of FDIC premiums in advance, the FDIC is effectively saying they are bust. Check out this article from MSNBC: “FDIC insurance plan is no long-term solution: Deposit insurance fund seen running a deficit as soon as this month“. Here are some relevant highlights:

• A plan that regulators proposed Tuesday to have banks prepay $45 billion in insurance premiums won’t provide a long-term fix for the shrinking fund that insures bank deposits.
• Regulators said they expect the cost of bank failures to grow to about $100 billion over the next four years – up from an estimate of $70 billion earlier this year. Faced with that sobering news, they voted to require banks to prepay $45 billion in premiums to replenish an insurance fund that will start running dry on Wednesday.
• The FDIC board’s proposal to require early payments of premiums for 2010-2012 could take effect after a 30-day public comment period. Depositors’ money is guaranteed – up to $250,000 per account – by the FDIC. It would be the first time the agency has required prepaid insurance fees.

Breaking this down, the FDIC is going to essentially request a 3 year advance in premiums from a banking industry that is already struggling to ensure their debt/equity ratios make them technically solvent – does this make any sense? And while it is always possible for the dynamic duo of the Federal Reserve & US Treasury to come to the rescue via the printing of money, the growing global focus on the overall US debt position and passionate domestic disgust for the “to big to fail” bailouts, may decrease the likelihood of this probable outcome.

So here you have it, the FDIC needs an injection of money to stay solvent. This hasn’t caused any ripples yet – however, the possibility is still there. Even if the FDIC is able to provide depositors with cash back in the event of a bank failure, it may take months.

UPDATE: H.R. 1207 Hearing

A hearing was held last Friday, September 25, 2009 to discuss H.R. 1207: Federal Reserve Transparency Act of 2009. Fighting in the left corner, for the Federal Reserve, was Federal Reserve General Counsel Scott Alvarez. Fighting in the right corner was Thomas E. Woods Jr., author of “Meltdown” – an excellent book on the landscape that led to the 2008 financial crisis. The following are video highlights of this meeting:

Ron Paul Opening Remarks
http://www.youtube.com/watch?v=zpxka0n_n8w

Ron Paul – Further Questioning
http://www.youtube.com/watch?v=AHYP_912cpQ

Alan Grayson PUMMELING Alvarez – THIS IS A MUST WATCH!
http://www.youtube.com/watch?v=mXmNpdYpfnk

Thomas E. Woods Jr. Testimony
http://www.youtube.com/watch?v=pbXVYTHU3_A

Please take the time to watch the clips highlighted above – a successful audit of the Federal Reserve is at the heart of correcting the economic problems facing the US and would have a significant impact on all of our futures.

UPDATE: Audit the Federal Reserve

http://www.auditthefed.com

• H.R. 1207: Federal Reserve Transparency Act of 2009 now has 296 co-sponsors, up from 292 last week.
• S. 604: Federal Reserve Sunshine Act of 2009 now has 28 co-sponsors, flat from 28 last week.

Future of the Dollar (9/25/09)

http://www.cnbc.com/id/15840232?video=1275511738&play=1

G20 is a Complete Waste of Time: Faber (9/25/09)

http://www.cnbc.com/id/15840232?video=1275472222

Ron Paul “We Should Never Be Fearful Of The Truth” (9/24/09)

http://www.youtube.com/watch?v=GZ5e5MfEY2o

Marc Faber – “Total Collapse Will Come” – Economic Armageddon – Dollar Crash (9/22/09)

http://www.youtube.com/watch?v=kYl_FFFGRBM

Federal Reserve Appeals Order to Disclose Emergency Bank Loans (9/30/09)

http://www.bloomberg.com/apps/news?pid=20601087&sid=arpi9R5g1p9w

• The Federal Reserve is appealing a judge’s order requiring the central bank to identify the financial institutions that benefited from its emergency loans, according to a lawyer representing Bloomberg LP.
• The central bank refused to divulge details about the companies participating in its 10 remaining lending programs, saying that doing so might set off a run by depositors.
• The Fed had until today to seek a reversal of the Aug. 24 decision by Manhattan Chief U.S. District Judge Loretta Preska, who ruled the Fed must release the identities, as well as disclose loan amounts and the assets put up as collateral.

GE’s Immelt warns US recovery slowest in decades (9/29/09)

http://www.google.com/hostednews/ap/article/ALeqM5i-Pfrk5oFIF5mFO90vPkGrc2f2LgD9B0VNKO0

• General Electric Co. chief executive Jeffrey Immelt warned Tuesday that high unemployment and slower lending will drag on U.S. economic growth, likely resulting in the weakest recovery in decades.
• “There are reasons to believe that this recovery could look different from ones in the past,” Immelt said in a speech in Singapore. “There’s not a lot of confidence that it’s going to be great.”
• “Easing up money has always been the elixir to keep the economy in recovery mode,” Immelt said. “But once you get interest rates to zero percent, you can’t go much below that, which is kind of where we are right now.”

World Bank says don’t take dollar’s place for granted (9/27/09)

http://www.reuters.com/article/businessNews/idUSTRE58Q1YU20090927

• World Bank President Robert Zoellick said the United States should not take the dollar’s status as the world’s key reserve currency for granted because other options are emerging.
• In excerpts released on Sunday from a speech that he is to deliver on Monday, Zoellick said global economic forces were shifting and it was time now to prepare for the fact that growth will come from multiple sources.
• “The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency,” he said. “Looking forward, there will increasingly be other options.”

The dead end kids: Young, unemployed and facing tough future (9/27/09)

http://www.nypost.com/p/news/business/the_dead_end_kids_AnwaWNOGqsXMuIlGONNX1K

• The number of young Americans without a job has exploded to 53.4 percent – a post-World War II high, according to the Labor Dept. – meaning millions of Americans are staring at the likelihood that their lifetime earning potential will be diminished and, combined with the predicted slow economic recovery, their transition into productive members of society could be put on hold for an extended period of time.
• The number represents the flip-side to the Labor Dept.’s report that the employment rate of 16-to-24 year olds has eroded to 46.6 percent — the lowest ratio of working young Americans in that age group, including all but those in the military, since WWII.
• And worse, without a clear economic recovery plan aimed at creating entry-level jobs, the odds of many of these young adults — aged 16 to 24, excluding students — getting a job and moving out of their parents’ houses are long. Young workers have been among the hardest hit during the current recession — in which a total of 6.9 million jobs have been lost.

The dollar is dead – long live the renminbi (9/25/09)

Whatever happens at the G20, the days of Western dominance are at an end, says

http://www.telegraph.co.uk/finance/comment/jeremy-warner/6232623/The-dollar-is-dead—long-live-the-renminbi.html

• Sometimes it takes a crisis to restore reason and equilibrium to the world, and so it is with the trade and capital imbalances that were arguably the root cause of the financial collapse of the past two years.
• To economic purists, the changes now under way in demand and trade are inevitable, necessary and even desirable. Even so, dollar supremacy and the geo-political dominance of the West are both likely long-term casualties.
• In direct contradiction of US objectives, Angela Merkel, the German Chancellor, accuses Britain and America of using the issue of trade imbalances to backtrack on financial reform and bankers’ bonuses. “We should not start looking for ersatz [substitute] issues and forget the topic of financial market regulation,” she said before boarding the plane to Pittsburgh.
• Yet even in China the establishment of a newly affluent, free-spending middle class may now have gained an unstoppable momentum. In any case, the country can no longer rely on American consumers to provide jobs and growth. It needs a new growth model, which means ultimately adopting the Henry Ford principle that if you want a sustainable market for your products, you have to pay your workers enough to buy them.
• These trends – all of which pre-date the crisis but which, out of necessity, are being greatly accelerated by it – will eventually drive a move away from the dollar as the world’s reserve currency of choice. As China takes control of its economic destiny, spends more and saves less, there will be less willingness both to hold dollar assets and to submit to the domestic priorities of US monetary policy.
• None of this will happen overnight. Depressed it might be, but US consumption is still substantially bigger than that of all the surplus nations put together. All the same, that the dollar’s reign as the world’s dominant currency is drawing to a close is no longer in doubt.

Frank backs Rep. Ron Paul’s Fed audit bill (9/25/09)

http://www.marketwatch.com/story/frank-backs-rep-ron-pauls-fed-audit-bill-2009-09-25

• House Financial Services Committee Chairman Barney Frank, D-Mass., said he backs legislation introduced by Rep. Ron Paul, R-Texas, that would require the Government Accountability Office to audit how the Federal Reserve implements monetary policy and examines every aspect of the Fed, including how much it has lent and will lend to specific banks as part of its bank bailout program.
• “We are serious about some legislation in this regard,” said Frank at a hearing on Paul’s bill. “I have some concerns, some time needs to elapse before certain disclosures take place, we are working together; we want there to be publicity but we don’t want there to be a market effect in the near term.”
• The legislation introduced by Paul, which requires approval by the House Financial Service Committee before it comes to a vote by the full House, has 295 supporters in the House.

Volcker: Obama Plans Maintain ‘Too Big To Fail’ (9/24/09)

http://www.huffingtonpost.com/2009/09/24/volcker-too-big-to-fail-s_n_298429.html

• A top White House economic adviser says the Obama administration’s proposed overhaul of financial rules preserves the policy of “too big to fail,” and could lead to future bailouts.
• Former Federal Reserve Chairman Paul Volcker said Thursday that by designating some companies as critical to the broader financial system, the plans create an expectation that those firms enjoy government backing in tough times. That implies those financial companies “will be sheltered by access to a federal safety net,” he said.
• Volcker, 81, has emerged as one of the administration’s internal critics. He serves as head of President Barack Obama’s Economic Recovery Advisory Board, but has said the administration should take a slower, more methodical approach to overhauling the financial system.
• Volcker served as Fed chairman from 1979 to 1987, when he tamed raging inflation, though at the cost of painful interest rate hikes that triggered a recession.

Taiwan Central Bank Said to Urge Cuts in Dollar Bets (9/24/09)

http://www.bloomberg.com/apps/news?pid=20601080&sid=ankufzlVnArA

• Taiwan’s central bank urged lenders to reduce their bets against the U.S. dollar after the island’s currency reached a three-month high, according to traders at foreign banks.
• An official at the Central Bank of the Republic of China (Taiwan) called and advised against taking too many U.S. dollar short positions, said the two traders, who asked not to be identified to safeguard their relationships with the monetary authority.

Dollar under scrutiny at G20 summit (9/24/09)

http://news.yahoo.com/s/afp/financeeconomyg20forexuschina

• The embattled US dollar is expected to come under scrutiny at a summit of developing and industrialized nations following China-led calls to review its role as a reserve currency.
• The dollar issue is bound to surface at the two-day meeting in Pittsburgh as US President Barack Obama and other leaders of the Group of 20 economies debate a new framework for tackling the so called global “economic imbalances” blamed for fuelling the latest financial crisis.
• Beijing was the first to call for a new global currency as an alternative to the US dollar as the US deficit rocketed — the White House estimates it could reach nine trillion dollars over a decade.

US May Face ‘Armageddon’ If China, Japan Don’t Buy Debt (9/24/09)

http://www.cnbc.com/id/33004753

• The US is too dependent on Japan and China buying up the country’s debt and could face severe economic problems if that stops, Tiger Management founder and chairman Julian Robertson told CNBC.
• “It’s almost Armageddon if the Japanese and Chinese don’t buy our debt,” Robertson said in an interview. “I don’t know where we could get the money. I think we’ve let ourselves get in a terrible situation and I think we ought to try and get out of it.”
• Robertson said inflation is a big risk if foreign countries were to stop buying bonds.
• “If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent,” he said. “It’s not a question of the economy. It’s a question of who will lend us the money if they don’t. Imagine us getting ourselves in a situation where we’re totally dependent on those two countries. It’s crazy.”
• “The U.S. has to quit spending, cut back, start saving, and scale backward,” Robertson said. “Until that happens, I don’t think we’re anywhere near out of the woods.”

Federal Reserve Admits Hiding Gold Swap Arrangements, GATA Says (9/23/09)

http://finance.yahoo.com/news/Federal-Reserve-Admits-Hiding-bw-2550373789.html?x=0&.v=1

• The Federal Reserve System has disclosed to the Gold Anti-Trust Action Committee Inc. that it has gold swap arrangements with foreign banks that it does not want the public to know about.
• The disclosure, GATA says, contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.

Social Security in the red (9/23/09)

http://www.examiner.com/x-23381-NY-Liberal-Examiner~y2009m9d28-Social-Security-in-the-red

• Forecasts that the Social Security system will for the first time since the 1980’s pay out more then it receives will no doubt send Republican leaders sprinting for the nearest microphone in an effort to hoist blame upon the President’s shoulders.
• The down economy is in fact the main culprit behind the Social Security deficit, with applications for retirement benefits jumping an estimated 23% and the applications for disability increasing 20% over the last year, the Associated Press reports. The increase in those seeking benefits though is not solely too blame, with increased unemployment leading to decreased Social Security tax revenue, creating a perfect storm of budgetary red ink.
• The AP went on to report that while the system will add an estimated $19 billion dollars to the Federal deficit over the next two years it will not face insolvency thanks to years of accumulated surplus earmarked for the payout of benefits.
• It seems clear that while any proposed solution will be universally panned and despised by approximately 50% of the country, the need exists for bravery, foresight, and action on this issue and not commissions, ignored recommendations, and aborted stabs at reform. The clock is ticking, the deficit is growing.

Housing Crash to Resume on 7 Million Foreclosures, Amherst Says (9/23/09)

http://www.bloomberg.com/apps/news?pid=20601087&sid=aw6_gqc0EKKg

• The crash in U.S. home prices will probably resume because about 7 million properties that are likely to be seized by lenders have yet to hit the market, Amherst Securities Group LP analysts said.
• “The favorable seasonals will disappear over the coming months, and the reality of a 7 million-unit housing overhang is likely to set in,” they said.
• The amount of pending foreclosed-home supply has been boosted by more borrowers going into default, fewer being able to catch up once they do, and longer time periods to seize properties because of issues such as loan-modification efforts and changes to state laws, the New York-based analysts wrote.

Highlights from “The International Forecaster” newsletter (9/30/09)

Published and Edited by: Bob Chapman

Check out or Subscribe to The International Forecaster

• The US in a scramble to fight off a deflationary depression is doing just the opposite. Trillion-dollar a year fiscal shortfalls for as far as the eye can see, accompanied by wars upon wars. Government spending accounts for 25% of GDP; the same as we experienced in WWII We have Fannie Mae, Freddie Mac, Ginnie Mae and FHA all bankrupt. Government is not only financing homes, but also companies, cars, Wall Street, banks and insurance companies. Taxpayers own 60% of GM and 80% of AIG, both of which are bound to fail. Under TARP government owns the banking system, most of which is insolvent. They all survive for now with government guarantees. We did not hear these problems being addressed at the G-20 meeting. All we saw was police and military beating innocent people or the use of tear gas, rubber bullets and sound cannons on innocent demonstrators some 20 and 30 blocks away from the downtown meeting area. Your Gestapo goons at work.
• Yes, too big to fail is still in vogue, just as it was in the 1930s. The Illuminati still does as it pleases, will continue to do so until we stop them. The past and current solution is taxpayer finance to just keep them in business. This cannot succeed because government is too big, irresponsible and incompetent to succeed in this venture. This is not temporary. It is impossible to unwind. It will continue indefinitely as corporatist fascism until the edifice collapses. The elitists cannot step back and let the economy function on its own. If they do it will collapse. This time they have gone too far. It is going to take the elitists and everyone else down with it. The solution should have been used in 1990, but that didn’t interest the elitists. It will never be safe to do what these people have done. There is no easy way out. No two-year depression. A long drawn out depression is the best that can be expected, although at the rate the shadow government is progressing in the Middle East we could end up in a nuclear war. Zero interest rates cannot work. All they do is foster financial asset speculation. That means failure for many and loans that will never be paid back. Just look at the horrendous numbers in the last issue of corporate loans gone bad. The banks are buried in these nonperforming assets. That means more taxpayer funds to keep the banks solvent. The elitists and our government are running amok. There are no controls. That in part is why the President and House and Senate have plunging approval ratings. Last week’s hearings in the House on HR 1207 were pathetic. Rep. Grayson destroyed the attorney for the Fed. It was legal disembowelment. We had best get HR 1207 and SB 604 or government could be facing all out revolution. 66% of Americans want the Fed audited and investigated. This is an extremely high figure considering what the Fed does is difficult for most people to understand. Our guess is that Americans are tired of seeing their savings dwindle and their wages and buying power fall.
• The stock market is up because of massive liquidity injections as corporate insiders sell their shares on a 30 to 1 basis. This is absurd, there is no recovery only a flattering out which will stretch into the next election. After that its just more stimulus and money and credit injections accompanied by hyperinflation. At the height of that inflation 1-1/2 to 2 years from now the dollar will be officially devalued and default will take place. These events will bring much higher gold and silver prices. As long as the dollar depreciates gold will move higher. In order to create a false stimulation of the economy the elitists have sacrificed the value of the dollar and the conclusion will be that they are going to lose control of their suppression of the gold market. From here on out the situation will become desperate for the elitists. They either increase money and credit, which is presently over 20%, the banks start increasing lending, or there is a $2 trillion stimulus. The big five money center banks will need massively more funding otherwise they will fail and take 75% of American depositors with them in a world of little if no insurance. Why do you think corporate America is bailing out of their shares? They have no confidence in the economy. In addition the invasions of Afghanistan and Pakistan will bring an end of the American empire. It is simply no longer affordable.
• What is going to happen next is that the 6-month stock rally is about to end. It took everything the Fed could muster to accomplish this. As the market heads lower government, Wall Street and banking will have to contend with irate shareholders and retirees as well as owners of stock, life cash value insurance policies and annuities. This time when the market falls it isn’t coming back. The bottom on the Dow will be 2,600 to 4,200 if we are lucky. This time the financial system is in too deep. There can be no reversal. How can there be if the American taxpayer guarantees 90% of all mortgages, so that the legacy banks, as they are now called, can make ever more money.
• While all this transpires unemployment payouts worldwide are running out. Spain is on its back along with Ireland and Italy tells us that without a continuation of cash for clunkers there will be a disaster in the country. In the US car sales are expected to fall 40% in September. European sales are expected to fall by one million units in 2010. In the US banks’ lending has fallen 14% in the third quarter. It is like the 1930s all over again. This points out the fallacy of the G-20 of saving and increased consumption simultaneously. There is no mystery. Even though government lies about its statistics we can figure them out and the result is not good. The conclusion is the Fed and other European banks will have to partake in massive additional monetization to stave off a deflationary depression and it has already begun.
• An interesting observation appeared in the Australian Shooter Magazine this week: If you consider that there has been an average of 160,000 troops in the Iraq theater of operations during the past 22 months, and a total of 2112 deaths, that gives a firearm death rate of 60 per 100,000 soldiers.
• The firearm death rate in Washington, DC is 80.6 per 100,000 for the same period. That means you are about 25 percent more likely to be shot and killed in the US capital, which has some of the strictest gun control laws in the US, than you are in Iraq.
• Conclusion: “The US should pull out of Washington.”
• Many subscribers are telling us they are having difficulty getting funds out of their bank accounts. Just a $5,000 withdrawal brings inquires from customer services. Banks are illegally holding checks and wires to deposit two weeks or longer in order to use the funds in their float.
• If homes were valued in gold the present median price would be 150 ounces, or the same valuation as of 1988.
• State tax revenues in the second quarter plunged 17% from a year earlier as rising unemployment and reduced spending hurt sales- and income-tax collections, according to Census Bureau figures released Tuesday.
• The decline was the sharpest since at least the 1960s. The biggest drop among major revenue sources was in state income taxes, which were down 28% from a year ago. Sales-tax revenues fell 9%. About two- thirds of state revenues are derived from sales and income taxes. The numbers aren’t adjusted for inflation or changes in tax rates.
• One other technical oddity bears consideration. Jason Goepfert, of Sundial Capital has apparently noted that the S&P and Nasdaq have risen for five straight months from the March lows. Amazingly, NYSE monthly volume has declined consecutively over those five months. We are told that Mr. Goepfert’s work indicates that there has never been that kind of divergence for longer than two months. The rubber band certainly looks stretched.