Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6 billion foreign-exchange reserves and hold fewer dollars. “The major part of Indian reserves are in dollars -- that is something that’s a problem for us,”

^{Matt Taibbi on how Goldman Sachs has engineered every major market manipulation since the Great Depression}

The Obama administration will proceed with a Bush-era plan to use National Security Agency assistance in screening government computer traffic on private-sector networks, with AT&T as the likely test site, according to three current and former government officials. (WP is a free subscription)

July 3 (Bloomberg) -- Six banks in Illinois and one in Texas were seized by regulators as the deepening financial crisis pushed the toll of failed U.S. lenders this year to 52, the most since 1992.

FN: Can California residents pay their taxes with IOUs now? I mean, it would only be fair right? The same arguments apply. Expenses exceed revenues for the individual consumer, just like the state. So why can the state pay its bills with IOUs but individuals can't pay the state with IOUs? State rolls out $3.36 billion in IOUs today: "California plans to begin issuing billions of dollars in IOUs today to scores of creditors, including private businesses and county governments.

Thousands Fan Out in Afghanistan's South in Crucial Test for Revised U.S. Strategy(WP is a free Subscription)

Only time will tell what the second half of the year will bring, but the ongoing debasement of the dollar and other fiat currencies still favors the ongoing accumulation of gold and silver. By doing so, the above tables make clear that you are saving sound money, namely, money that preserves your purchasing power.

As we hope the breakdown above has revealed, the future solvency of the United States as a nation state is currently in jeopardy. It is in far deeper trouble than the mainstream press cares to admit. There are simply not enough new buyers of debt on this planet to support the spending programs of the United States government - and it appears that current holders of debt are beginning to sell. Because it is impossible to balance the budget from outside sources of capital, the only source of funds left for the US, in all reality, is continued money printing. The Federal Reserve’s policy of Quantitative Easing is failing. The US budget is ludicrous, spending is out of control, spending promises are out of control, the world knows it - and we know it.

“It’s still down,” Findlay says of the Case-Shiller index. “The only positive news is that Colorado slightly improved. There’s still extreme pressure due to (mortgage) delinquencies.”

The US dollar has been depreciating for generations. Seventy years ago it was first devalued from $20.67 a gold ounce to $35. Then 35 years ago the devaluation started gaining strength. The dollar has lost over 90% of its gold value since August 15, 1971. History is repeating . . . Sound money is again being trashed, which is causing the collapse of the American empire.

Don't own gold yet? Don't worry...Because even at $940 an ounce, gold prices are still positioned to surge by three... four... or even five times! In fact, if gold prices perform even half as well as they did during the bull market of the 1970s, the yellow metal will explode to over $2,500 in a matter of months.

This year, the number of foreclosures may rise to 2.5 million, the highest on record, according to Lawrence Yun, chief economist of the Realtors’ group. “The foreclosure wave we’ve been through is not over,” said Susan Wachter, a real estate professor at the University of Pennsylvania’s Wharton School in Philadelphia. “That’s why we don’t see a bottom in housing yet.”

June 30 (Bloomberg) -- Delinquency rates on the least risky mortgages more than doubled in the first quarter from a year earlier as U.S. efforts to help homeowners failed to keep pace with job losses that pushed more borrowers toward foreclosure.

All of a sudden, Congress is paying close attention to Ron Paul. The feisty congressman from Texas, whose insurgent "Ron Paul Revolution" presidential campaign rankled Republican leaders last year, now has the GOP House leadership on his side -- backing a measure that generated paltry support when he first introduced it 26 years ago. Paul, as of Tuesday, has won 245 co-sponsors to a bill that would require a full-fledged audit of the Federal Reserve by the end of 2010.

_{Both Gold and Crude Oil are Strategic Commodities with Dollar Implications}

But as the deficits grow, the threat of inflation — with the problems that it brings — grows, too, if only because the measures the country needs to take to prevent inflation are so difficult. There are only three ways to cut the debt: raising revenue, cutting expenses or inflation. Will the nation cure its debts by raising taxes and cutting spending? "Sure," says Merk. "And then we will all fly to the moon." Otherwise, he says, "Inflation is the answer."

China's banks are veering out of control. The half-reformed economy of the People's Republic cannot absorb the $1,000bn (£600bn) blitz of new lending issued since December. Money is leaking instead into Shanghai's stock casino, or being used to keep bankrupt builders on life support. It is doing very little to help lift the world economy out of slump.

With a subtitle like "From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again

Combine easy monetary policies with large fiscal deficits, and the likelihood of much higher inflation is there. Once we go to 10% inflation, 20% becomes quite likely and once we go to 20%, we can easily go into hyperinflation.

Fifteen states have depleted their unemployment insurance funds so far, forcing them to borrow from the U.S. Treasury. A recent U.S. survey by CareerBuilder.com, an online job search Website, concluded that 23 percent of jobless Americans rely on unemployment checks to get by.

Inflation is a special concern over the next decade given the pending avalanche of government debt about to be unloaded on world financial markets. The need to finance very large fiscal deficits during the coming years could lead to political pressure on central banks to print money to buy much of the newly issued debt.

There’s just one humongous problem: The Fed has proven time and time again that it isn’t up to the challenge!

A Republican congressman on Wednesday accused the Federal Reserve of a “cover-up” over the Bank of America-Merrill Lynch takeover, raising the stakes ahead of Fed chairman Ben Bernanke’s appearance on Thursday before a House subcommittee investigating the deal.

Hopes that the biggest post-war economic slump will soon end have been dashed after the rich world's leading economic institution slashed its forecasts for economic growth and warned that Britain next year faces the worst deficit in the industrialised world.

Britain's banks remain over-indebted, highly vulnerable and harbour growing funding gaps which leave them susceptible to future shocks, the Bank of England has said.

"We've got a situation where Geithner is smiling and has no choice but to stress the credibility and stability of the US financial and economic system, while the creditors [such as the Chinese] smile back and say they believe him, while at the same time giving hand signals to their reserve managers to get rid of these things [U.S. Treasuries]." - Neil Mellor, Bank of New York-Mellon

At least 19 states are still hammering out their spending plans as the recession wreaks havoc with their finances and sparks fights between governors and lawmakers. If spending plans aren't approved, state workers may not receive their paychecks and some government offices may shut down.

June 25 (Bloomberg) -- The number of Americans filing claims for unemployment benefits unexpectedly rose last week and the total number receiving payments increased, indicating the labor market may take longer to stabilize.

NEW YORK (MarketWatch) -- The top-performing letter that predicted the Crash of 2008 now predicts a confiscatory Franklin D. Roosevelt-style "bank holiday." Recommends to hold  35%-45% Gold Bullion....

How might you hedge your exposure to a weakening dollar? Well, you might by land and gold, to name a couple of popular assets. Well, a top Chinese Communist Party economist is urging his country to do the same thing.

A leading economist said in Seoul yesterday that the U.S. dollar's supremacy as the world's reserve currency is facing profound challenges as the balance of economic and financial power shifts East amid the current economic crisis. "There is a slow-burning fuse underneath the dollar," Gerard Lyons, chief economist at Standard Chartered Bank, said in the World Economic Forum.

 Citigroup Inc., the U.S. bank that got $45 billion of government funds, will raise base salaries by as much as 50 percent to help compensate for a reduction in annual bonuses, a person familiar with the plan said. The biggest increases will go to investment bankers and traders, said the person, who declined to be identified.

Inflation is dead – long live inflation! We hear about the threat of hyperinflation in the media – is this for real, can it happen in the U.S.? Are we hyping up the word inflation, is it an inflationary play of words to grab attention to discuss the threat of hyperinflation? Let’s deflate the hype and put inflation where it belongs… at the forefront of your concerns.

As Leona Helmsley explained, “Only the little people pay taxes.” Between debt

and taxes, many people are so strapped that they must run even further into debt

or suffer lower living standards. Borrowing more leads even more people into

bankruptcy, subject to the 2005 law that Congress wrote to favor creditors. The

economy is heading toward debt peonage as it polarizes between we

I bet that if the movie were shot today that guy would be standing there in a pair of boxers. I hope you folks who got all giddy about the SPX in the 900s and the DOW up around 8,800 took the opportunity to either sell or hedge. Sorry folks, but those "green shoots" are in fact marijuana plants and our President along with his economic advisers have been smoking 'em.

“Clear signs of a recovery have yet to emerge, and job losses and the steady stream of foreclosures are keeping many markets under pressure,” researchers for the Cambridge, Massachusetts-based center wrote. “Sales of both new andexisting homes continued to struggle to find a bottom.”

Sales of gold by the paper traders using either no inflation or IMF sales as an excuse will prove to have been nonsense under the present circumstances.

Nice, eh?  Do Treasury's bidding, get paid for it, get an extra $10 billion from the taxpayer as a gift to cover a bet you had already hedged against default, and pocket it all. Change we can believe in - yep, we'll steal even more than we did under The Bush Administration!

Legendary oil man T. Boone Pickens says that if the U.S. doesn’t take major steps to curb its reliance on foreign oil, the consequences will be drastic. “Let’s say in 10 years, you do nothing,” Pickens tells Fortune. “You will be importing 75 percent of your oil (up from 68 percent now), and you’ll be paying $300 a barrel.”

SAN FRANCISCO -- California's unemployment rate jumped nearly half a percentage point in one month to a record 11.5 percent in May, and Governor Arnold Schwarzenegger Friday warned the economy would not recover quickly.

The editors of The Daily Bell are pleased to present this comprehensive and exclusive interview conducted by Scott Smith with global strategist and free-market analyst David Morgan.

_{After two smugglers were stopped last week with what at first appeared to be $134bn in US state bonds, the tension and paranoia surrounding the fate of the dollar hit a new high.}

Primary care trusts are to set up anti-viral drug distribution centres and swine flu testing clinics amid fears that the infection could spread out of control.

In Breaking the Bank, FRONTLINE producer Michael Kirk (Inside the Meltdown, Bush's War) draws on a rare combination of high-profile interviews with key players Ken Lewis and former Merrill Lynch CEO John Thain to reveal the story of two banks at the heart of the financial crisis, the rocky merger, and the government's new role in taking over -- some call it "nationalizing" -- the American banking system.

We are headed into such a major eye-of-the-storm, there is a serious risk that Obama may be a one-term President. This is not a bullish forecast for the Republicans, for they do not appear to be a rising star on the horizon. The American people are on the precipice of dissatisfaction politically. We may see the the share market decline into the ,ful,l- 31 month decline and we may see the collapse in the debt structure due to the insane proposals of having the feds guaranteeing all the state debt.

After inserting your euros in the slot there is a familiar whirring noise as if the machine is readying itself to spit out a can of lemonade or a bar of chocolate. Instead there is a satisfying clunk as a prettily wrapped bar of the world's favourite precious metal thuds into the dispenser. "It's better value than the bank," Romy Erhardt of TG-Gold-Super-Markt told The Times, "And it's very convenient — no waiting time — you just put in your cash and a minute later you are an investor in gold."

Russian President Medvedev suggests the dollar is on its way out; Russian Finance minister Kudrin says there is no substitute for the dollar. The Chinese see a need to diversify out of the dollar; the Japanese say their trust in the dollar is unshakable. Let’s look at this puzzle and make some sense of it.

Warren Buffett shares Eveillard’s fear of inflation. “A country that continuously expands its debt as a percentage of GDP and raises much of the money abroad to finance that, at some point, it’s going to inflate its way out of the burden of that debt,” he tells CNBC.

June 17 (Bloomberg) -- It’s a plot better suited for a John Le Carre novel.Two Japanese men are detained in Italy after allegedly attempting to take $134 billion worth of U.S. bonds over the border into Switzerland. Details are maddeningly sketchy, so naturally the global rumor mill is kicking into high gear.

The story is that the government still thinks the state can fix itself, but if it can't then a bailout may be forthcoming. The seventh paragraph is the big one: ...policymakers continue to watch the situation closely and do not rule out helping the state if its condition significantly deteriorates, a senior administration official said. But in that case, federal help would carry conditions to protect taxpayers and make similar requests for aid unattractive to other states, the official said. The official did not detail those conditions.

International purchases of American financial assets grew more slowly in April as China, Japan and Russia pared demand for Treasuries, underscoring the danger of U.S. reliance on foreigners to finance its fiscal deficit. “Should this continue on a steeper pace, Treasuries could take a big beating,” saidRichard Yamarone, director of economic research at Argus Research Corp. in New York. “It’s something investors should watch with great interest.”

June 15 (Bloomberg) -- Manufacturing in the New York region this month contracted at a faster pace as sales and inventories declined, showing the economy is still months away from a sustained recovery.

_{Dozens of US cities may have entire neighbourhoods bulldozed as part of drastic "shrink to survive" proposals being considered by the Obama administration to tackle economic decline.}

Employment is, in fact, everything.  It is payments on credit cards, it is payments on mortgages, it is ability to buy a new house, it is the ability to buy a car, pay for your iPhone and so on. Without employment - sustainable, high-quality, high-paying employment that provides at least a solid middle-class wage, there is no economic stability, say much less economic growth.

Period.

A Congressional panel wants to get to the bottom of what the hell happened when Bank of America (BAC) bought Merrill Lynch. Recall that according to Ken Lewis' testimony, he wanted to get out of the deal when he discovered Merrill's December losses, but was pursuaded/bullied not to by Hank Paulson and Tim Geithner, who said it was a matter of systemic risk to the system, and that he and his board could be canned if he actually backed out.

I’ve finally figured out the Obama economic strategy. President Barack Obama and his team have been having so much fun wielding dictatorial power while rescuing “failed” firms, that they have developed a scheme to gain the same power over every business. The plan is to enact policies that are so anticompetitive that every firm needs a bailout. 

A few months ago we argued that China wouldn't thump us in the coming race to dominate the electric car market. We felt pretty good about the argument at the time. Then, we click over to All Cars Electric and we see this:

The US is the biggest economy in the world, and if the blame for the global economic crisis is put on the US, it is put on the centre of the financial world - it is the same thing.

House prices are finally approaching fair value.  Unfortunately, unless the housing bubble behaves differently than almost every bubble before it, house prices will now crash right through fair value and stay below it for a number of years. When prices do finally bottom, moreover, they aren't likely to recover quickly.

The official rate also doesn't include "involuntary part-time workers," or the 2 million people like Noel who took a part-time job because that's all they could get, plus those whose work hours dropped below the full-time level. Once those 9 million workers are added to the unemployment mix, the rate would be 15.8 percent. All told, nearly 25 million Americans were either unemployed, underemployed or had given up looking for a job in April.

WASHINGTON (Reuters) - U.S. employers cut 345,000 jobs last month, the fewest since September and far less than forecast, according to a government report on Friday that was the most definitive evidence the economy's severe weakness was diminishing. However, the Labor Department said the unemployment rate raced to 9.4 percent, the highest since a matching rate in July 1983, from 8.9 percent in April. This reading beat the peak in the jobless rate during the 1973-1975 recession that lasted 16 months.

In most issues of The Morgan Report I answer questions from our subscribers, this week I looked back at some past issues and picked out a few that might be of interest to this readership as well.