oftwominds-Charles Hugh Smith

This Week's Theme: The Rot Within

1984 + 23 = 2007


George Orwell's classic depiction of totalitarian control of a cowered populace, 1984 , needs to be updated. Today's U.S. government and its various agencies have no need to be so heavy-handed.

For instance, to coerce the population to accept their financial self-destruction, just convince them inflation doesn't exist, even as prices in the real world spiral ever-higher and their currency plummets to record lows against gold and other currencies.

This is essentially the whole control game in a nutshell: if you can enrich and extend the power of the Overlords while convincing the citizenry that their impoverishment and debt-serfdom results from their own personal failures, you have effectively instituted a subtle but brilliantly effective mind control.

Do you think I exaggerate for polemic purposes? Then consider the facts. Yesterday and today we are treated to official U.S. Government statistics which reveal that energy and food prices plummeted on both the wholesale and retail levels, while so-called "core inflation" (read: "some prices are more equal than others") checked in at a negligible 2.1% a year.

Meanwhile, in the real world, dairy goods have almost doubled in one year, food inflation is running 10% everywhere from China to the Mideast to your local supermarket, energy has quadrupled in a few years, tuition and medical insurance have leaped 10%+ a year and everything from water to local taxes to shipping has zoomed up in double-digit numbers.

Doesn't it strike you as odd that everything has leaped in price yet officially inflation is a barely-registering 2%?

Frequent contributor U. Doran sent in this chart-filled depiction of rip-roaring agricultural inflation by Gary Dorsch (SirChartsAlot): Beware - the Bernanke Fed could Ignite Hyper-Inflation!

He also recommended this extremely troubling explanation of how inflation coupled with our highly progressive tax rates could enable huge transfers of whatever wealth might remain in middle-class hands to the government:

SEIZING YOUR ASSETS TO COVER RETIREMENT PROMISES: How the Government May Do It .

Here's how it would work: your $100,000 in taxable assets grows to $1 million via rampant inflation even as its purchasing power declines as measured in gold, oil or other tangibles. You then sell the asset to live, and voila, you owe tax on $900,000 of entirely fictitious "gain." Once that pesky long-term capital gains tax is abolished, then 50% of your wealth--in terms of purchasing power, actually a lower value than it once was--is grabbed by the government as "gain."

(Note: I added 10% to the Federal tax rate of 40% for the Great Greedy oops I mean Golden State of California. Your local tax pit might be somewhat less egregiously greedy.)

If this isn't Orwellian, then please tell me what is.

And lest you think your supposedly rising stock investments (dollars) have not already shrunk mightily in the past few years, cosider this chart courtesy of Sir Charts Alot (Gary Dorsch):



Readers of the book (1984) will recall that permanent war is an essential feature of the government's control: to install fear, loyalty via patriotism, and the sense of endangerment/ being surrounded by enemies--all mind-control techniques brilliantly exploited by Hitler.

Hey, have you ever heard of a place called Iraq?

You know, that desert hotspot where our government has fielded a shadow army of 180,000 well-paid workers and mercenaries in addition to the regular Army, Navy and the Marines. Yeah, that place--the one with dozens of permanent U.S. bases scattered around the landscape. It's all part of "The Long War," the cool new modern moniker for Permanent War.

And where do all these SIVs, CDOs, MBS and other financial "innovations"--all the financial legerdemain at the heart of the global shift of assets into derivatives and instruments which can no longer even be priced--where did it all originate? That globe-striding House of Mirrors, the U.S.A.

Correspondent Riley T., who retired from a career in accounting, offers this comment on the Fed rate cut.

"I continue to feel that I have a very good fundamental understanding of accounting and finance. Companies that I was Corporate Controller and V.P. Finance of did very well and we had a good understanding of our business.

This rate cut by Bernanke is absolutely nuts. ( MBA term )

I actually don't seem to be able to express how nuts I actually think this is. Could it be a psychological mind set that Americans don't have to experience any pain or even discomfort? We as a nation, have we become hysterical, is Cramer a computer generated copy of the American mind?

The idea that America will continue to reduce interest rates instead of reducing our debts should drive every foreigner out of dollar denominated assets. I think we are seeing a total breaking of faith that holds the world's financial system in place.

Having a good accounting and finance back ground is an incredible handicap in understanding what these people are up to.

What the hell is going on?"

Perhaps what's going on is a new level of contextual and financial gamemanship. Wall Street cheered the rate cut, and so did the press. Why?

Did it lower mortgage re-sets? No--those are set to the LIBOR (London market rate) which the Fed doesn't control.

Did it bolster the key underpinning of our national wealth, our currency? No--it weakened it.

Did it encourage foreign investors to invest their money in the U.S.? No--it drove them away, with potentially catastrophic results.

New contributor Jim S. sent in this important story Fears of dollar collapse as Saudis take fright.

"Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East."
And Saudi Arabia isn't the only holder of massive U.S. dollar assets who may bolt:

China threatens 'nuclear option' of dollar sales:

"Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.

Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds."

Welcome to the new improved 1984, called 2007, where reality is masked by double-speak and bogus accounting at every level of the power structure.

When will the embattled middle-class catch on to the con? They won't, because they'll be too busy trying to pay their debt bills, their stripped-to-nothing medical insurance, their medications to maintain a zombie-like acceptance of the lies, and their cable TV to see the "reality shows" and other entertainments (i.e. Roman Coliseum spectaculars) which fill every nook and cranny of their visual and auditory world.


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