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“The Number One vulnerability is the dollar itself,” Rickards concluded. “We’re printing them and shoving them out the door, and the Fed is basically out of bullets. So why hasn’t the dollar collapsed? The short answer is, global investors don’t have any other choice.” That is, there simply aren’t enough Euro- or Yen-backed securities for investors to shift their money out of dollars and into some other currency.

But what if some kind of global coalition – say a trillion-dollar sovereign wealth fund allied with several countries around the world – banded together to create a gold-backed alternative to the dollar?

There is a 70 percent probability that the restructuring plan for U.S. automakers will consist of a prepackaged bankruptcy financed by government loans to get GM and Chrysler through to 2009, Moody’s said in a report dated Dec. 15. Under that scenario, bondholders would be likely to lose less than 75 percent of their investment, Moody’s said.

The Moody’s assessment comes as the White House weighs a bailout of the automakers. GM and Chrysler are seeking $14 billion in federal funds to keep operating through the first quarter of next year. GM debt traded yesterday for as little as 7.7 cents on the dollar, so if Moody’s recovery prediction is right, bondholders stand to gain.

“We believe the potential loss for creditors under this scenario would exceed the loss that would occur in a scenario where the restructuring did not involve a bankruptcy filing, but will probably be less than the 75-100 percent range associated with a freefall bankruptcy scenario,” Moody’s analysts Mike Mulvaney and Bruce Clark wrote in the report.
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Moody’s assigned a 25 percent probability that the United States will bail out the automakers with no bankruptcy, and a 5 percent chance the automakers will go bankrupt without government assistance.

The Bush administration agreed Friday to consider aid options, including use of the Treasury’s Troubled Asset Relief Program, after Senate Republicans refused to take up the plan passed by the House earlier in the week.

Sen. Bob Corker (R-Tenn.), who tried to broker the failed Senate compromise legislation, proposed a plan that would require automakers to offer bondholders 30 cents on the dollar and set wages similar to those paid by foreign companies such as Volkswagen.

“We think there is a declining level of support for the initial plan discussed, in which it was the view of auto manufacturers that they are on the right track and the problem is one of liquidity,” Clark said on a conference call with reporters yesterday.

Already under investigation by local prosecutors for its potential role in the scandal, the firm, Friehling & Horowitz, is now also being investigated by the American Institute of Certified Public Accountants, the prestigious body that sets U.S. auditing standards for private companies.

The problem: The auditing firm has been telling the AICPA for 15 years that it doesn’t conduct audits.

The AICPA, which has more than 350,000 individual members, monitors most firms that audit private companies. (Public-company auditors are overseen, as the name suggests, by the Public Company Accounting Oversight Board, which was created in 2003 in response to accounting scandals involving WorldCom and Enron.)

Some 33,000 firms enroll in the AICPA’s peer review program, in which experienced auditors assess each firm’s audit quality every year. Forty-four states require accountants to undergo reviews to maintain their licenses to practice.

Friehling & Horowitz is enrolled in the program but hasn’t submitted to a review since 1993, says AICPA spokesman Bill Roberts. That’s because the firm has been informing the AICPA — every year, in writing — for 15 years that it doesn’t perform audits.

Meanwhile, Friehling & Horowitz has reportedly done just that for Madoff. For example, the firm’s name and signature appears on the “statement of financial condition” for Madoff Securities dated Oct. 31, 2006. “The plain fact is that this group hasn’t submitted for peer review and appears to have done an audit,” Roberts says. AICPA has now launched an “ethics investigation,” he says.

As it happens, New York is one of only six states that does not require accounting firms to be peer-reviewed. But on the heels of the Madoff revelations, on Tuesday, the New York State senate passed legislation that requires such a process. (The bill now awaits Gov. David Paterson’s signature.) “We’ve not been regulated in the fashion we should’ve inside the state,” says David Moynihan, president-elect of the New York State Society of Certified Public Accountants.

David Friehling, the only active accountant at Friehling & Horowitz, according to the AICPA, might seem like an odd person to flout the institute’s rules. He has been active in affiliated groups: Friehling is the immediate past president of the Rockland County chapter of the New York State Society of Certified Public Accountants and sits on the chapter’s executive board.

Friehling, who didn’t return calls seeking comment, is rarely seen at his office, according to press reports. The 49-year-old, whose firm is based 30 miles north of Manhattan in New City, N.Y., operates out of a 13-by-18-foot office in a small plaza.

A woman who works nearby told Bloomberg News that a man who dresses casually and drives a Lexus appears periodically at Friehling & Horowitz’s office for about 10 to 15 minutes at a stretch and then leaves. (State automobile records indicate that Friehling owns a Lexus RX.) The Rockland County District Attorney’s Office has opened an investigation to see if the firm committed any state crimes.

People who know Friehling, through the state accounting chapter and through the Jewish Community Center in Rockland County (where he’s a board member) were reluctant to discuss him. Most members of both boards wouldn’t comment except to say they were surprised by Friehling’s connection to Madoff.

“I’ve abandoned free-market principles to save the free-market system,” Bush told CNN television, saying he had made the decision “to make sure the economy doesn’t collapse.”

Bush’s comments reflect an extraordinary departure from his longtime advocacy for an unfettered free market, as his administration has orchestrated unprecedented government intervention in the face of a dire financial crisis.

“I am sorry we’re having to do it,” Bush said.

But Bush said government action was necessary to ease the effects of the crisis, offering perhaps his most dire assessment yet of the country’s economy.

“I feel a sense of obligation to my successor to make sure there is not a, you know, a huge economic crisis. Look, we’re in a crisis now. I mean, this is — we’re in a huge recession, but I don’t want to make it even worse.”

At a G20 summit last month in Washington, Bush resisted some proposals for global financial regulation and argued free market principles still held true despite the global economic downturn.

And administration officials have also referred to the primacy of the free market when discussing a possible government bailout for the troubled US auto industry.

In the interview, Bush said that a “disorganized bankruptcy” of the carmakers could create “enormous” economic difficulties.

The Organization of Petroleum Exporting Countries agreed that the group’s 11 members with quotas will trim current production by 2.46 million barrels a day to 24.845 million barrels a day, OPEC president Chakib Khelil said in Oran, Algeria. OPEC has held four meetings in as many months in an attempt to stem the slide in prices.

“It’s less than meets the eye,” said Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York. “This may stem the bloating in stocks but isn’t enough to get rid of the surplus.”

Crude oil for January delivery declined $3.54, or 8.1 percent, to $40.06 a barrel at 2:47 p.m. on the New York Mercantile Exchange, the lowest settlement since July 13, 2004. Futures touched $39.88 during trading today. Prices have tumbled 73 percent from a record $147.27 on July 11.

Inventories rose 525,000 barrels to 321.3 million barrels last week, the U.S. Energy Department said today in a weekly report. Supplies have climbed 11 percent since Sept. 19.

“They are facing the distinct possibility of oil falling to $30 a barrel and even lower,” said Addison Armstrong, director of market research for Tradition Energy in Stamford, Connecticut. “They have to bring supply down further because they aren’t getting any help on the demand front until the second half of next year at the earliest.”

The cut is larger than a 2 million-barrel reduction indicated yesterday by Saudi Arabian Oil Minister Ali al-Naimi.

OPEC’s Compliance

OPEC’s rate of compliance with a previous output cut is more than 85 percent, al-Naimi told reporters today before the ministerial meeting that decided production targets.

“The market gave every signal that there had to be an additional cut of at least 2.5 million barrels if OPEC expected to bolster prices,” Armstrong said. “There is such a lack of trust when it comes to compliance that it was impossible to agree to what was needed. This lack of trust gives members every incentive to cheat on quotas.”

Russia cut oil exports by 350,000 barrels a day last month and may reduce supply a further 320,000 barrels a day next year, in collaboration with OPEC, if prices remain weak, Russian Deputy Prime Minister Igor Sechin told OPEC ministers during opening speeches at today’s meeting. Other non-OPEC producers, including Kazakhstan, may trim production as well, Sechin said.

Other Producers

Azerbaijan may lower production as much as 300,000 barrels a day, Energy Minister Natig Aliyev said in Oran. BP Plc and partners shut two platforms at the Central and West Azeri fields in the Caspian Sea following a gas leak on Sept. 17.

“Russia will be offering the 300,000-to-400,000-barrel cut that’s already under way,” Eagles said. It may be a sign that disruptions in Azerbaijan are “going to last a bit longer than they previously thought.”

OPEC will next meet on March 15 in Vienna and has chosen Angolan Oil Minister Jose Maris Botelho de Vasconcelos as its president for 2009.

“I think the jury should still be out,” said Sarah Emerson, managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Massachusetts. “We will have to see their compliance. If they come close to their objective, we believe they will forestall a further decline in prices.”

Brent crude oil for February settlement declined $1.12, or 2.4 percent, to close at $45.53 a barrel on London’s ICE Futures Europe exchange.

U.S. gasoline inventories rose 1.3 million barrels to 204 million barrels in the week ended Dec. 12, the Energy Department report showed. Supplies of distillate fuel, a category that includes heating oil and diesel, climbed 2.94 million barrels to 133.5 million barrels, the highest since November 2007.

‘Nothing Bullish’

“There is nothing bullish in these numbers,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “The OPEC announcement looks big on first glance but really isn’t. They are playing with smoke and mirrors.”

Inventories have gained because the oil market is in contango, where crude for future delivery is more expensive than near-month prices, encouraging stockpile increases.

Supplies at Cushing, Oklahoma, where oil that’s traded in New York is stored, climbed 21 percent to 27.5 million barrels, the highest since May 2007.

“The big build at Cushing shows that in a contango market everyone who can is taking delivery, which makes it much more difficult for OPEC to hold it together,” Barakat said.

Tumbling Demand

U.S. fuel demand in November dropped 7.4 percent from a year earlier to the lowest for the month since 1998, the industry- funded American Petroleum Institute said in a report today.

Chrysler said Wednesday that it would close all its factories for at least one month, starting at the end of this week, in response to plunging vehicle sales in the United States.

The company said the plants would resume production no sooner than Jan. 19. Some plants will remain closed for several more weeks. Normally, the Detroit automakers close their factories for about two weeks at the end of the year.

Workers at the plants will be laid off during the down time, but the companies’ jobs bank program ensures that they will continue to receive most of their pay. The United Automobile Workers union agreed this month to suspend the jobs bank to help the companies save money, but it is unclear when that change will take place; after it does, workers whose plants are idled will receive only unemployment benefits.

Meanwhile, worries that Chrysler could be forced to file for bankruptcy have spooked many dealers into borrowing so much money from the automaker’s lending arm that the company said it might need to suspend the loans.

Dealers have been requesting nearly $60 million a day from a fund used to finance vehicle inventories, and a total of $1.5 billion since July, Chrysler Financial’s chief executive, Thomas F. Gilman, told dealers in a letter dated Dec. 12. Mr. Gilman called the requests “troubling” and urged dealers not to borrow more than “what’s absolutely necessary for the operation of your business.”

The announcements come with vehicle sales in the United States at the lowest level in 26 years. Chrysler’s sales were down 47 percent in November, compared to a 37 percent decline for the industry over all.

Chrysler’s chief executive, Robert L. Nardelli, told Congress this month that the company needed an immediate loan of $7 billion to help it survive into the new year. Senate Republicans blocked legislation to aid Chrysler and the other Detroit automakers last week, but the Bush administration is expected to step in with some form of assistance.

G.M., which has said it needs $4 billion this month to stay afloat and another $14 billion after that, said last week that it would shut 20 plants in North America for at least part of the first quarter. Ford has also announced significant production cuts but says that it is healthier than the other two companies and does not need any loans immediately.

“People just don’t want to buy cars,” Anthony Viviano, the chairman of Sterling Heights Dodge and Meadowbrook Dodge near Detroit, said. “Hopefully, by Friday the president O.K.’s this thing. We just have to calm everybody down.”

Mr. Gilman’s letter, first reported Wednesday by Bloomberg News, showed that dealers were feeling jittery along with their would-be customers.

“They don’t know what to do. They’re just running wild,” Mr. Viviano said. “They’re getting scared.”

Money that car dealers borrow to cover the cost of vehicles on their lots is known as floor-plan financing. At Chrysler Financial, early loan payoffs go into a “cash management account,” which the dealers can then borrow from as needed. The dealers get 2 percent bonuses on money they keep in the account for a certain period of time.

Without access to floor-plan financing, few dealers would be able to order new vehicles.

“Chrysler Financial finances 75 percent of all vehicles shipped to U.S. dealers, and we continue to support our dealer body with uninterrupted wholesale financing,” a Chrysler Financial spokeswoman, Amber Gowen, said.

Chrysler said its dealers, during a recent meeting at the company’s headquarters in Auburn Hills, Mich., told executives that they had lost 20 percent to 25 percent of their volume because consumers were unable to obtain loans.

“They have many willing buyers for Chrysler, Jeep and Dodge vehicles but are unable to close the deals, due to lack of financing,” Chrysler said.

In addition to idling their plants, automakers have been trying to save money by shrinking the size of their work force.

In November, Chrysler cut about 5,000 salaried jobs through a buyout and early retirement program. By the end of this month, it is expected to have eliminated more than 1,800 hourly positions.

OCA, November 12, 2008

* Former Iowa Governor Tom Vilsack’s support of genetically engineered pharmaceutical crops, especially pharmaceutical corn:

http://www.gene.ch/genet/2002/Oct/msg00057.html
http://www.organicconsumers.org/gefood/drugsincorn102302.cfm

* The biggest biotechnology industry group, the Biotechnology Industry Organization, named Vilsack Governor of the Year. He was also the founder and former chair of the Governor’s Biotechnology Partnership.

http://www.bio.org/news/pressreleases/newsitem.asp?id=200…

* When Vilsack created the Iowa Values Fund, his first poster child of economic development potential was Trans Ova and their pursuit of cloning dairy cows.

* Vilsack was the origin of the seed pre-emption bill in 2005, which many people here in Iowa fought because it took away local government’s possibility of ever having a regulation on seeds- where GE would be grown, having GE-free buffers, banning pharma corn locally, etc. Representative Sandy Greiner, the Republican sponsor of the bill, bragged on the House Floor that Vilsack put her up to it right after his state of the state address.

* Vilsack has a glowing reputation as being a schill for agribusiness biotech giants like Monsanto. Sustainable ag advocated across the country were spreading the word of Vilsack’s history as he was attempting to appeal to voters in his presidential bid. An activist from the west coast even made this youtube animation about Vilsack

The airplane in this animation is a referral to the controversy that Vilsack often traveled in Monsanto’s jet.

It’s a package of about $8.7 trillion dollars’ worth of potential taxpayer commitments for loans, guarantees and other bailout goodies for businesses and distressed homeowners.

Amid the tissue paper:

* More than $1.5 trillion in Federal Deposit Insurance Corp. loan guarantees, including a $139 billion assist to the lending arm of General Electric Corp.

* $1.8 trillion in cash, tax breaks and loan guarantees doled out from the Treasury Department to taxpayers, financial institutions and credit companies.

* $300 billion for homeowners from the Federal Housing Authority.

* $25 billion in assistance for auto companies from a program overseen by the Energy Department, which is separate from the bailout proposal that tanked last week in the Senate.

* And $5 trillion worth of new money, loan guarantees and loosened lending requirements from the Federal Reserve Bank.

According to Bianco Research President James Bianco, who crunched these numbers, that amounts to more government aid and assistance than nine other historic bailouts and big government outlays combined.

The New Deal, for instance, cost an estimated $32 billion in its day, which would be about $500 billion in today’s dollars. The Marshall Plan cost about $12.7 billion, which is the equivalent of a paltry $115.3 billion. The Louisiana Purchase? The French got $15 million, which would be worth about $217 billion today.

If you take those three items, add in the adjusted costs of the Race to the Moon, the savings and loan crisis, the Korean War, the Iraq war, the Vietnam War and assistance for NASA, you still get to just $3.92 trillion — not even half of the taxpayers’ exposure today, according to Bianco.