financial crisis

The Only True Standard of Value
from  Richard Russell’s Dow Theory Letters
April 20, 2011 — The dollar is doing just what the Fed wants it to do — it’s sinking, sinking and sinking more. Sadly, the great American public doesn’t understand what’s happening, and if they were told they couldn’t care less. Of course, what the public does notice is the painful result of the dollar’s bear market. The result is seen every time Joe six-pack and his wife hit the neighborhood super-market. The rising prices are a shocker.
And if the price of your favorite cold cereal has not been raised, there is less of the cereal in the box. Then when Joe has to fill up the buggy to get home, he groans as he sees the gasoline tab. “Sixty bucks to fill up this lemon. I’m going to get a motorized bike,” growls Joey. “This country is going to hell in a hand-basket.”
The US has been getting away with spending more than it takes in, ever since World War II. It’s a process that isn’t sustainable, and if a process is unsustainable it will end. The US’s habit of spending more than it’s paying for has finally hit a brick wall. The wall is the demise of the famous “Yankee dollar.” In order for the US to live over its head, it must borrow.
Half of the US’s borrowing comes from foreign sources. And that’s a problem. The fiat US dollar has no fixed value. It’s worth must be measured against other currencies. “The dollar is worth so much in relation to the Brit pound — or the dollar is worth so much in terms of the euro.” Our foreign creditors, many of whom are loaded with dollars, keep a sharp eye on the comparative value of the dollar, and they’re now frightened and mulling over the credit-worthiness of the US. The recent warning from the S&P rating agency heightened our creditors worries about both the US and the dollar.
The disgraceful battle between Obama and the Democrats vs. Paul Ryan and the Republicans is further raising the fears of our creditors. With commodity inflation now out in the open, Fed head Bernanke has a problem. His absurd defense is to refer to “core inflation” (without the cost of food and energy). Bernanke announces to the world that there’s “no inflation,” and besides if there is inflation the Fed can end it any time they want.
What Bernanke and the Fed can not control is the tell-tale price of gold.
As I write the battle is on to keep June gold from closing above 1500. Yesterday June gold hit an intra-day high of 1500, but can it close there? “Ah,” Bernanke must be thinking, “If I could only control the price of that damn gold.”
Yesterday, as I looked at my computer, and I could see the fierce struggle that was going on as gold whipped up six dollars, then five minutes later it is up a dollar-fifty. There must be a powerful contingent (perhaps backed by the Fed) that is desperate to keep the price of gold DOWN and below 1500. But alas for the Fed, gold is traded internationally across the face of the
planet and 24 hours a day. Gold is out of the hands of the Fed and Goldman Sachs, and it trades everywhere and where it wants.
This year I’ve been telling my subscribers to think in terms of two concepts:
(1) Think in terms of avoiding losses (rather than thinking in terms of building fat profits).
(2) Think in terms of PURCHASING POWER. Are you gaining or losing purchasing power?
For ten years I’ve advised my subscribers to climb aboard the great bull market in gold. Early subscribers who have followed my advice now have huge paper profits, many have become millionaires, others have been able to retire on their gold positions. Even new-comers have benefited from their belated investments in gold.
Over the last 12 months, the dollar price of gold is up 31.32 percent. Gold is the only true standard of value. The value of everything else must be measured in terms of gold. “How many ounces of gold does it take today to buy a new Ford?” “How many ounces of gold did it require to buy a new ford in 1932?” It costs a lot more (in dollars) to buy a new Ford today. But how many ounces of gold does it cost to buy a new Ford today compared with the ounces required in 1932 to buy a new Ford? What has changed, gold or the dollar? Gold hasn’t changed, what has changed is the dollar, which has lost purchasing power.
The US public is rapidly being educated about money and gold. Ads are appearing almost daily in the newspapers, telling readers how and why to buy gold. The ads are being confirmed by the rising price of gold. The public is finally “getting it”. I’ve been in this business since 1958, and I’ve seen a lot of advisory services come and go — a lot! What I notice is that there are a number of fairly new advisories that are climbing (entering) on the back of the gold bull market. These advisories are sending out mass mailings to the public — educating them on the fact of the dying dollar and the Fed’s plan to solve the debt problem by diminishing the purchasing power of the dollar. As Lincoln put it, “You can’t fool all of the people all of the time.” Clueless as the American populace is, they are finally learning about gold, something that their great grandparents took for granted.
In terms of gold: Assessing real estate values in terms of gold. At its peak, the housing market in March 2007, the median US home price was $262,600, which was equivalent to 340.6 ounces of gold. Today’s median income price is $186,100 or 109.2 ounces of gold. So in terms of real money, gold, the US median home price has lost 47% since 2007.
Applying the same measurements to the Dow, from the end of 2001 to the end of 2008 an investment in the Dow would have lost 81% of its purchasing power in terms of gold (statistic courtesy Larry Edelson of the outstanding “Uncommon Wisdom” advisory).
The great and harsh lesson of history now stares Americans in the face — no fiat currency in history has ever survived. This fact underscores the growing panic to get out of dollars and out of all fiat currencies.
This emphasizes the irony of those who are rushing into dollars or dollar denominated bonds and blue-chip stocks on the thesis that these are “safe havens.” It’s a rush out of dollars to get into other forms of dollars. What’s happening now is on a greater scale than has ever occurred before in the history of mankind. It’s going to hit the current generation of Americans like a whirlwind. It will be historic in its intensity and destructiveness.
The great gold rush of 1849 opened up the American West. This gold rush of the early 2000’s will open up the eyes of Americans to the danger of the Federal Reserve and fiat money.
Below in log scale — one of the greatest and most significant bull markets in US history.
Below, the Dow over the exact same period.
Richard Russell


Collateralized debt obligation is now effectively worthless because the collateral behind the debt can no longer be collected. The banks cannot go and get it.
Let’s say you have 10 mortgages at $1 million a piece, the sum total of those mortgages are $10 million. So, the banks took the 10 mortgages and bundled them together into a collateralized debt obligation or CDO with a face value of $10 million.
They then sold that new entity that they created to an investment group of some sort, a pension fund, hedge fund, etc. promising them a yield of let’s say 7%. The sales pitch would emphasize the fact that this CDO was backed by real collateral. In the event of loan defaults by the borrowers, the banks would tell the buyer of the CDO that the collateral behind the loan could be sold to recapture any potential losses on the part of the purchaser.
Everything seemed to work fine until the defaults began and the foreclosure process kicked into high gear. The foreclosure process has exposed fatal flaws in the system and the flaw is that the banks cannot prove clear ownership of the mortgage.
Consequently, they are then barred from foreclosing on the property. Because they can no longer foreclose on the properties, the CDO is now effectively worthless.
The hedge funds and the pension funds cannot now sell these CDO’s on the open market, so how are they going to recover their original investment? Perhaps you may say that won’t be a problem because these instruments were insured. The problem is now the credit default swap or the insurance policy that was purchased to protect against default assumes that the insurer has the financial wherewithal or resources to make good on the claim.
If there were only a small number of these problem CDO’s this would not be an issue. But as the number of the foreclosures continue to skyrocket, and more and more banks are prohibited from seizing the collateral behind the property, the sheer magnitude of the number of claims presented to the insurer will overwhelm their balance sheet.
In effect what you have is an insurance company which doesn’t have enough money to pay off the claims. Compounding the problem is the fact that the CDO’s and credit default swaps related to these claims form a mass network of interdependence. This then ripples through the entire system and creates a domino effect which can cause the failure of entities creating the next financial crisis.
Ultimately the Federal Reserve will be asked to step in and buy up the now worthless CDO’s and put those on its balance sheet. In order to do this the Federal Reserve will have to engage in massive quantitative easing, taking onto its balance sheet the worthless CDO’s in exchange for newly issued treasuries.
This of course will have a horrific effect on the US Dollar which is why gold and silver are heading much higher.
Dan Norcini (JS Mineset)
The following excerpt is from the weekly missive of a brilliant Dow Theory market newsletter titled: “The Stock Market Barometer“.
It looks at today’s economic and financial woes from a truly free minded point of view.
If what you read feels right to you, why not take a subscription to enjoy the real McCoy!

Sooner or later you have to ask yourself how you got into this predicament and I’ve come to the conclusion that it was all part of a plan, a plan that took a century to play out and cut far deeper than anyone ever could have imagined. To say it was sinister is an understatement. How do you set out to steal the wealth of an entire nation, and not just any nation, but the richest most powerful nation in the world? America was founded by a group of men who were the Socrates of their generation; men of wealth and position who rejected the threats and orders of their leaders because the leaders were fundamentally flawed. So they rebelled, and they won. The republic they formed was not perfect, but it was better than any that had come before. The foundation they laid allowed the United States to become the richest and most powerful nation in the world within a very short time of 137 years, and it did so with a relatively small government, no central bank, and no income tax. It also led to the formation of the largest middle class the world has ever seen, and it was a middle class that was educated.

By 1913 the US possessed the finest public school system in the world, from kindergarten to university, and it helped produce the Ford’s, Edison’s, and Wright brother’s that turned the world on its ear. Life in the US was difficult but it offered benefits and the promise of something better. That’s what caused hundreds of thousands of people to immigrate to the US from 1875 to 1915 as the word spread about America. Great minds who sought freedom of thought came to the US and made great contributions. By comparison the United States now imports Jamaican gangs and Mexican drug dealers, and all the corruption that comes with it.

Did you know that the drug dealers pay out millions of dollars a year to lobbyists in order to ensure that the US never legalizes drugs! They are illegal, pay no taxes, corrupt our system, make no contribution what-so-ever, and yet they have more influence on Congress than you or I do. Is that a great country or what?

Although I can’t prove it, I believe that once the Fed and income tax were implemented in 1913, someone sat down and decided that a nation of thinkers was no longer desirable because they would be too hard to control. Instead what was needed was a nation of mules needed to pull the cart of civilization. Until the early part of the 1900’s the purpose of education was derived from the Latin word educo, meaning to draw out from within. Slowly that began to change and was replaced by a giant babysitting service that produced a slave mentality enhanced by years carrot-and-whip grading. Original thought was frowned upon. You read a book or listened to a lecture and then vomited that back onto a piece of paper, and the best grade went to the student with the best memory. No thinking required. To ensure the illusion of education, quotas were introduced requiring degrees to become mandatory. In order to distract the masses so they wouldn’t know what they were missing, television was introduced with an almost infinite amount of channels. Sports became the end all for many so you could live vicariously through your team. Then came the X-boxes and the video games; all designed to dumb down the masses. Caesar threw bread to the masses at the Coliseum, giving them blood sport and just enough sustenance so they wouldn’t notice the Empire crumble around them.

In order to control an uneducated mass you need a big bureaucracy and that’s why government has expanded so much in the US over the last thirty years. Don’t ever think that Big Brother is there to protect you, Big Brother is there to control you, and if he can’t control you he will suppress you. If you resist he will use “extreme prejudice”. He will try to scare you into submission by telling you that your security is in jeopardy, thereby convincing you to give up little bits and pieces of the freedom that so many Americans fought and died for 200 years ago. I wouldn’t be surprised if Jefferson, Franklin, Adams and Madison were rolling over in their respective graves as they see what we’ve done with their work. The US Constitution has been so disemboweled that what passes for the law of the land today would be unrecognizable to them, and therein lays the problem. How are you going to take back what you threw away? This question goes beyond markets and money, and involves your basic freedom. As things get worse in the US people are going to become upset, they’ll want to assign blame while those in charge will not want to relinquish their grip on power. Conflict will result as the courts will not recognize your rights under the US Constitution. That as I see it is where we are headed and we are now so far down that road that there is no turning back.”

The End-Game and The Illusory Gold Bubble

Darryl Robert Schoon

When the end-game began, gold was $35 per ounce. Today, gold is $1200. When the end-game is over, gold will be far higher.

Midway through 2010 we are approaching the end of the end-game, the resolution of the monetary imbalances that began in 1971. For more than 2500 years, gold was money: but, in 1971 that changed. After 1971, money was no longer connected to gold. For the first time in history, money had no intrinsic value.
After the Bretton Woods Agreement in 1945 until 1971, the world’s currencies were anchored to the US dollar which was convertible to gold. Thus, directly or indirectly, all currencies could be exchanged for gold; but on August 15,1971 the US cut the ties between the US dollar and gold; and all currencies became fiat.

It was as if someone removed a pin from the axle of international commerce when the US dollar was no longer convertible to gold. Previously, the US dollar was linked to gold, and other currencies were linked to the dollar. Everything was stable. It is no longer so. Once the pin connecting gold and paper money was removed, everything changed. The axle of international commerce began to vibrate and lately it’s been getting much worse. The fear is that the wheels are now about to come off.
– Page 9, How to Survive the Crisis and Prosper in the Process


The cutting of ties between money and gold set in motion the extreme monetary instability that was to characterize the 1970s. In 1960, the US prime rate was 5 %. At the end of the decade, the rate was 6.75 %. But when money became fiat in 1971, US rates became extremely volatile, vacillating between 4.50 % and 21.50 % during the next ten years.
In my article America at the Crossroads and the War on Gold, I pointed out the role of former Fed chairman Paul Volcker in destabilizing the monetary system. Believed by most to be a “hard-money hero”, Volcker was, in fact, the very opposite.
Volcker, as under-secretary of the Treasury in 1971, played a critical – and largely unknown role – in the removal of gold from the international monetary system and is therefore responsible for much of the monetary chaos which has since ensued:
From 1969 to 1974 Mr. Volcker served as under-secretary of the Treasury for international monetary affairs. He played an important role in the decisions leading to the U.S. suspension of gold convertibility in 1971, which resulted in the collapse of the Bretton Woods system. read here.
Appointed as Chairman of the Federal Reserve by President Carter in 1979, Volcker was at the helm when inflationary forces he had earlier unleashed almost destroyed the US economy in 1979-1981.
Volcker’s draconian raising of interests rates in 1980 was necessary to quell the inflationary fires he had lit in 1971; and although successful, Volcker’s role is not dissimilar from others who put out fires they themselves start.


While it was Paul Volcker who set the end-game in motion, it was Alan Greenspan, his successor at the Fed, who would greatly accelerate the process by putting US financial markets beyond the reach of government regulators.
Volcker was replaced by Greenspan as Fed Chairman because Volcker wouldn’t dismantle existing financial regulations as desired by the Reagan White House and Wall Street investment banks. As Nobel Prize winner Joseph Stiglitz later explained:

Paul Volcker, the previous Fed Chairman known for keeping inflation under control, was fired because the Reagan administration didn’t believe he was an adequate de-regulator.

In Alan Greenspan, Wall Street got the Fed chairman they wanted, someone who would provide them with an unending flow of central bank credit and who would turn a blind eye as to what they would do with it. Alan Greenspan was Wall Street’s wet dream come true.
During his 19 year tenure as Fed Chairman, Alan Greenspan ushered in an era of loose credit producing massive profits for Wall Street along with two of the largest bubbles in history, the US and US real estate bubbles.
Greenspan with consummate political timing resigned as Fed Chairman just before his extraordinary credit bubble collapsed. However, a third, even larger bubble which Greenspan nurtured, still has yet to burst. This is the government bond bubble, by far now the largest bubble in history
The enormous government bond bubble was “Fed” by the excessive issuance of credit made possible by the removal of gold from the monetary system, thereby allowing governments to freely borrow what they had just printed.
Once Volcker controlled the fires of runaway inflation in 1980/1981, the issuance of government credit and debt exploded upwards under Greenspan’s tenured aegis at the Federal Reserve.
This soon-to-be fatal rise in US debt would not have been possible had the US dollar been tied to gold. This is why both bankers and governments who profit and live by debt oppose a return to the gold standard or any attempt to again tie their currencies to gold.
…a gold standard and a redeemable currency…enables a people to keep the government and banks in check. It prevents currency expansion from getting ever farther out of bounds until it becomes worthless…
Professor Walter E. Spahr, Chairman of the Department of Economics, NYU, 1927-1956
Banker John Exter, present when Volcker cut the ties between the US dollar and gold, later commented on the consequences of Volcker’s historic decision: The final link between the dollar and gold was broken. The dollar became nothing more than a fiat currency and the Fed [and especially the banks] were then free to continue monetary expansion at will. The result..was a massive explosion of debt
Today, the debt is due and owing and repayment is increasingly in doubt. Economics isn’t rocket science. It’s cause and effect and since the introduction of debt-based money, the primary cause of economic expansion has been credit.
The consequence of credit is its deadly effluvia, debt; and when the issuance of credit can no longer service or roll-over constantly compounding debt, parcus nex, economic death, otherwise known as the end game, ensues.
The enormous amount of government debt – total sovereign debt now totals $34 trillion dollars – can never be repaid. The end of the end-game will come when investors collectively realize this is so. That realization has not yet happened. When it does, for most it will be too late.


Some believe gold is a bubble. It is not. The price of gold, however, tracks a bubble and that is why it is mistaken for one.
The real bubble is government debt, not gold. Government debt is a bubble that hasn’t yet burst; one that has grown even more rapidly in the last two years as almost all nations went far deeper into debt after the 2007/2008 global collapse.
..sovereign debts grew by almost 30% in just two years. Sovereigns became the majority of worldwide debt. Several countries doubled their debts from 2007 to 2009 (BIS data) read here.
This recent meteoric rise in government debt has been matched by a corresponding rise in the price of gold. When government borrowing rose after 2007, the price of gold also rose, from $700 to $1200 per ounce, almost precisely tracking the rise in government debt.
(Click on image to enlarge)
the ballooning size of the US Treasury’s debt, which hit a record $12.8-trillion last month, has been a steady linchpin supporting the historic rally in the gold market over the past decade. As a general rule of thumb, every $1- trillion of fresh debt issued by the Treasury equates with a $125 /ounce increase in the price of gold. As long as the Fed and G-20 central banks continue to peg ultra-low interest rates, – and G-20 governments continue to flood the debt markets with huge quantities of IOU’s, – it translates into monetization, and the trajectory for the gold market would stay bullish.
When the government debt bubble bursts – and it will – gold will not collapse as will bonds and other paper IOUs. When it happens, the collateral damage to the US dollar and fiat currencies may well be fatal and the price of gold – the only safe haven in such times – will explode upwards.
The recently revealed Bank of International Settlement 382 ton gold swap is evidence of gold’s value in such times. Hinted at by Julian D.W. Phillips in his insightful article, Gold Is Back As Money, Michael J. Kosares connected the dots in his post, BIS Swap Signifies A Threat To Europe, Not To Gold, by pointing out that the swap was probably conducted with Portugal.
Portugal, whose gold reserves equal (or rather equaled) 382 tons, badly needs to refinance its debt and when investors no longer trust sovereign bonds, gold is far more preferable as collateral than a government’s promise to repay.
Note: In the swap, the BIS most likely used commercial banks as intermediaries in order to disguise central bank use of gold as financial collateral.
The European debt crisis marks the beginning of the end of the government debt bubble. Only a false sense of confidence is now supporting sovereign bond markets. In the spring of 2010 that confidence was shaken; and, someday, it will disappear entirely.
We live in interesting times. We are in the end-game.
Buy gold, buy silver, have faith.

Sprott Asset Management‘s chief investment strategist, John Embry, writes for Investor’s Digest of Canada that collapse of the U.S. dollar is almost inevitable and gold is about to reassert itself as money in a shocking way. 
The headline on Embry’s commentary is “U.S. Dollar’s Collapse Inevitable” and you can find it at the Sprott Asset Management site HERE
By Ambrose Evans-Pritchard
The Telegraph, London
Sunday, June 20, 2010

We already know that the eurozone money markets seized up violently in early May as incipient bank runs spread from Greece to Portugal and Spain, threatening the first big sovereign default of our era. Jean-ClaudeTrichet, the president of the European Central Bank (ECB), talked days later of “the most difficult situation since the Second World War, and perhaps the First.”
The ECB’s latest monthly bulletin gives us some startling details. It reveals that the bank’s “systemic risk indicator” surged suddenly to an all-time high on May 7 as measured by EURIBOR derivatives and stress in the EONIA swaps market, exceeding the strains at the height of the Lehman Brothers crisis in September 2008. “The probability of a simultaneous default of two or more euro-area large and complex banking groups rose sharply,” it said.
This is a unsettling admission. Which two “large and complex banking groups” were on the brink of collapse? We may find out in late July when the stress test results are published, a move described by Deutsche Bank chief Josef Ackermann as “very, very dangerous.”
And are we any safer now that the EU has failed to restore full confidence with
its E750 billion (L505 billion) “shock and awe” shield — that is to say after throwing everything it can credibly muster under the political constraints of monetary union? This is the deep angst that lies behind last week’s surge in gold to an all-time high of $1,258 an ounce.
The World Gold Council said on Friday that the central banks of Russia, the Philippines, Kazakhstan, and Venezuela have been buying gold, and Saudi Arabia’s monetary authority has “restated” its reserves upwards from 143 to 323 tonnes. If there is any theme to the bullion rush, it is fear that the global currency system is unravelling. Or, put another way, gold itself is reclaiming its historic role as the ultimate safe haven and benchmark currency.
It is certainly not inflation as such that is worrying big investors, though inflation may be the default response before this is all over. Core CPI in the US has fallen to the lowest level since the mid-1960s. Unlike the blow-off gold spike of the Nixon-Carter era, this rally has echoes of the 1930s. It is a harbinger of deflation stress.
Capital Economics calculates that the M3 money supply in the US has been contracting over the past three months at an annual rate of 7.6 percent. The yield on two-year Treasury notes is 0.71 percent. This is an economy in the grip of debt destruction.
Albert Edwards from Societe Generale says the Atlantic region is one accident away from outright deflation — that ninth Circle of Hell, “abandon all hope, ye who enter.” Such an accident may be coming. The ECRI leading indicator for the US economy has fallen at the most precipitous rate for half a century, dropping to a 45-week low. The latest reading is -5.70, the level it reached in late-2007 just as Wall Street began to roll over and crash. Neither the Fed nor the US Treasury were then aware that the US economy was already in recession. The official growth models were wildly wrong.
David Rosenberg from Gluskin Sheff said analysts are once again “asleep at the wheel” as the Baltic Dry Index measuring freight rate for bulk goods breaks down after a classic triple top. The recovery in US railroad car loadings appears to have stalled, with volume still down 10.5 percent from June 2008.
The National Association of Home Builders’ index of “future sales” fell in May to the lowest since the depths of slump in early 2009. RealtyTrac said home repossessions have reached a fresh record. A further 323,000 families were hit with foreclosure notices last month. “We ‘re nowhere near out of the woods,” said the firm.
It is an academic question whether the US slips into a double-dip recession or merely grinds along for the next 12 months in a “growth slump.” For Europe, nothing short of a sustained global boom can lift the eurozone out of the deflationary quicksand already swallowing up the South.
Spain had to pay a near-record spread of 220 basis points over German Bunds last week to clear away an auction of 10-year bonds, roughly what Greece was paying in March. Leaked transcripts of a closed-door briefing to the Cortes by a central bank official revealed that Spanish companies have been shut out of the capital markets since Easter. Given that the Spanish state, juntas, banks, and firms have together built up foreign debts of E1.5 trillion, or 147 percent of GDP, and must roll over E600 billion of these debts this year, this is a crisis unlikely to cure itself.
By their actions, investors show that they do believe the EU can be relied upon to back its rescue rhetoric with hard money, and for good reason. Germany’s coalition risks breaking up at any moment, fatally damaged by popular fury over the Greek bailout. Far-right populist Geert Wilders is suddenly the second force in the Dutch parliament. Flemish separatists have just won the Belgian elections in Flanders. The likelihood that an ever-reduced group of German-bloc creditors facing disorder and budget cuts at home will keep footing the bill for an ever-widening group of Latin-bloc debtors in distress is diminishing by the day.
Fitch Ratings said it will take “hundreds of billions” of bond purchases by the ECB to stop the crisis escalating. Since Bundesbank chief Axel Weber has already deemed the first tranche of purchases to be a “threat to stability,” it is a safe bet that Germany will fight tooth and nail to prevent such a move to full-blown quantitative easing. The bloodletting along the fault-line between Teutonic and Latin Europe will go on, as the crisis festers.
Yet the markets are already moving on in any case. They doubt whether the EU’s strategy of imposing of wage cuts on half of Europe without offsetting monetary and exchange stimulus can work. Such a policy crushes tax revenues and risks tipping states into a debt-deflation spiral, as if everbody had forgotten the lesson of the 1930s.
Greece’s public debt will rise from 120 percent to 150 percent of GDP under the IMF-EU plan. There is a futile cruelty to this. As Russia’s finance minister Alexei Kudrin acknowledges, a Greek “mini-default” has become inevitable.
EU president Herman Van Rompuy confessed that EMU lured countries into a fatal trap. “It was like some kind of sleeping pill, some kind of drug. We weren’t aware of the underlying problems,” he said.
What he has yet to admit is that the north-south imbalances built up since the euro was launched — indeed, because the euro was launched — cannot be corrected by further loans from the north or by pushing the south into depression. The political fuse will run out before this reactionary and self-defeating policy is tested to destruction.
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