The Hindenburg Had a Ceiling Too

The Hindenburg Had a Ceiling Too

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What is the biggest lesson from America’s debt ceiling spectacle?

On August 1, the U.S. president announced that a deal raising the debt ceiling and cutting spending had been reached. The White House called it a “win for the economy and budget discipline.”

If it was such a win, why does it feel like we just got hit in the face with a clump of dirt?

The market obviously doesn’t think anything is solved. On Tuesday, the S&P got hammered for the seventh day in a row—making it the longest losing streak since the dark days of 2008. The Dow Jones was down too. So was the Nasdaq.

More than a trillion dollars in stock market wealth simply evaporated.

Coming after politicians supposedly saved the nation, the stock market crash was particularly ominous.

“I would have expected to see a (stocks) relief rally almost immediately upon passage in the Senate,” said Fred Dickson, chief market strategist at The Davidson Cos. in Lake Oswego, Oregon. “It hasn’t happened.”

Instead markets slumped hard! Why?

Simply put: The debt deal stinks. The compromising Congress may pay the immediate bills, but nothing has been done to even begin to fix the debt problem.

More ominously, no one believes anything Washington says anymore. Everyone can see what a farce it has become. Politicians on the verge of bringing the whole government to a halt over cutting a couple of hundred billion dollars a year over 10 years (most of it back loaded years into the future)—while the economy is going further into debt by the trillions. Fiddling while America burns.

And it is not just the average guy on the street who sees America’s peril. The big players see it too. The debt ceiling fiasco was played prime-time for the world to see.

What did the big players do? Just look at what went up and what went down.

As the stock market slid and the value of America’s businesses evaporated, one investment soared. Unfortunately, it is an investment that indicates more trouble ahead for America.

On Tuesday, gold prices blew through previous records. Then on Wednesday, they charged higher still—reaching $1,666 per ounce.

As American politicians were arguing who got the window seat on the Hindenburg, the Bank of Korea announced it was buying gold. Other big players evidently were too. Meanwhile, the dollar was being dumped—sending it toward its 2008 crisis lows.

“There has been a fundamental shift in the behavior of central banks,” says Natalie Dempster, head of government affairs for the World Gold Council. “Central banks on the whole have been net sellers of gold for the past two decades” (emphasis added).

What has changed?

For 20 years central banks believed the U.S. dollar was as good as gold. They sold their reserves and accumulated interest-earning treasury bonds instead. The dollar became the new global reserve currency.

But now, the world is realizing that the U.S dollar is facing a bonfire. Gold might get melted by the coming financial inferno, but at least it won’t go up in smoke.

Fundamental reform of the world’s monetary system has begun,” writes Forbes’s Charles Kadlec. The world is trying to wean itself off the dollar.

The Asians are hard at it. Once Europeans gets their act together, expect dollar dumping and gold buying from them too. When the first major European central bank dumps dollars for gold, it will be the spark that lights up the hydrogen balloon.

The fact that America’s political class evidently has no idea what the term “budget discipline” really means is only adding hot gas to the explosive mix.

America is great at talking the talk—and telling other nations how to run their economies. But when it comes to walking the walk, that is a different story. At least that is what the debt ceiling spectacle conveys.

But soon, America isn’t going to have a choice in the matter. It has its own walk with reality looming.

On July 29, the government released revised gdp figures. Oops. Apparently, government statisticians overestimated the pace of recovery in virtually every single quarter over the past four years. The new numbers also show that the economy has not recovered to its post-crisis peak—even though for the past half-year the government has claimed that not only has the economy recovered, but it has been reaching new highs.

The gdp figures are one of the most important market-moving figures released by the government, so it was pretty convenient for politicians to have stats showing that all their “stimulus” spending was working. Now we find out that much of the recovery really was make-believe and all that extra deficit spending really didn’t do as much as advertised.

The shrinking gdp figures were confirmed by July’s jobs report. The economy produced 18,000 jobs in June, according to the Bureau of Labor Statistics. In a workforce of 153 million, that number is statistically insignificant—it could have just as easily been minus 18,000. The adp employment report for July suggests 100,000 jobs were created this past month. That may sound like great news, but even that number isn’t high enough to keep up with population growth.

The official unemployment rate, which is stuck at an economy-suffocating 9.2 percent, is heading higher again. But who knows what the real unemployment rate is. Will it be revised?

Reality is also coming home to the housing market. There is no housing market recovery. Nineteen out of 20 cities in the S&P/Case-Shiller index show house prices falling over the past year, Bloomberg reports. And now some politicians are pushing to cut the mortgage deduction as a way to increase tax revenue. What do you think that will do to prices, and thus sales, new construction and jobs?

Prepare to reduce your standard of living.

Tougher times are about to come to America. The new debt limit agreements have done nothing to fix America’s addiction to debt. Debt levels, already at dangerous levels, are set to rise far higher than even the most drastic cuts proposed so far.

There was no win for the economy or budget discipline on August 1. But it was a sad spectacle, soon to be eclipsed by an even more spectacular economic explosion.

Italy Drafts Law to Ban Burka

Italy Drafts Law to Ban Burka

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The Italian Parliament will vote on a law to ban face-covering veils in September after the constitutional affairs commission approved a draft of the law August 2. The bill is supported by Italy’s ruling coalition, so it will probably become law.

The law would ban anyone from wearing something in public that covers the face, such as a motorbike helmet. It would also forbid anything with “ethnic origins” from covering the face. Violators would be fined up to €300 (us$426) and given some kind of community service. Anyone who forces another to cover her face could be jailed up to 12 months and pay a fine of up to €30,000 (us$43,000).

“Five years ago no one wore the burka [in Italy]. Today there is always more. We have to help women get out of this segregation … to get out of this submission,” said the law’s sponsor, Moroccan-born Souad Sbai, a member of Italian Prime Minister Silvio Berlusconi’s People of Freedom Party.

With France and Belgium already enforcing similar laws, burka banning seems set to become standard across the continent of Europe.

A Warm Friend of Israel

A Warm Friend of Israel

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Remembering a genuine legacy of peacemaking in the troubled Middle East

He had no political party, no royal office, no government commission. He possessed no personal fortune, nor was he backed by any state or corporate interest. Yet he met personally with dozens of heads of state: prime ministers, presidents, kings, emperors, princes and princesses, and many other leaders of government and industry. And though he also rubbed shoulders with Nobel Prize winners, artists, singers and athletes, he spent much of his time among the middle class, the lower class, and the tragically impoverished. He teamed up with other leaders in science and education to improve the lives of millions. A prolific author, educator, philanthropist and minister, he taught the true causes of the problems facing humanity and their ultimate solutions.

People called him an ambassador without portfolio with a commission for peace. His name was Herbert W. Armstrong.

Leaders across the globe respected his message, extended him personal invitations, and collaborated with him. Several became his close friends. Mr. Armstrong sometimes traveled 300 days out of the year. But of all the places he visited, his greatest passion was for Jerusalem.

As a devoted student and teacher of the Bible, Mr. Armstrong believed in the glorious future of the Holy City. He flew to the new nation of Israel more frequently than anywhere else; during one four-year period, he returned about 50 times.

In the autumn of 1968, Ambassador College officials took interest in an archaeological project in Israel. It was one of the most significant digs ever undertaken in Jerusalem: an excavation near the Western Wall in the Old City, recently won in the 1967 Arab-Israeli War. It was being conducted by Prof. Benjamin Mazar, director of the Israel Exploration Society and former president of Hebrew University. Deeply impressed with Professor Mazar’s excavation, Mr. Armstrong wanted to support it.

Mr. Armstrong was invited to meet with Professor Mazar and Israeli leaders in a private room of the Knesset. There, Tourism Minister Moshe Kol, a signer of the 1948 Declaration of Independence, proposed “a partnership with Israel” that he called “an iron bridge that can never be broken” between the school Mr. Armstrong founded, Ambassador College, and Hebrew University. Soon afterward, Mazar visited Ambassador College in California and Texas. In their time together, Mr. Armstrong and Professor Mazar had developed mutual trust. Though the archaeologist had turned down three other major American universities seeking involvement in his project, Mazar now offered Ambassador College a 50/50 joint participation.

On Dec. 1, 1968, the president of Israel, Zalman Shazar, became the first head of state to meet with Mr. Armstrong. When asked if he wanted to put the relationship in a formal legal contract, Mr. Armstrong responded, “My word is good, and I believe yours is too, without any legal entanglements.” It was the beginning of a beautiful relationship that would last the rest of Mr. Armstrong’s life.

Each summer, scores of Ambassador students excitedly packed up and flew to Israel to volunteer on the excavation, a massive site on the southern wall of the Temple Mount. The “big dig,” as it became known, would continue for a decade, and hundreds of Ambassador students, praised as the excavation’s most enthusiastic laborers, would have the opportunity to touch those ancient stones.

The mutual respect between Mr. Armstrong and Professor Mazar grew. The two friends could often be seen walking arm-in-arm visiting the site, or relaxing at Dr. Mazar’s home in Jerusalem, and the professor visited Ambassador College on a number of occasions. In connection with the dig, the two men also delivered a joint lecture in Japan to Tokyo’s leading educators and scientists. Professor Mazar viewed his friend as “cosmopolitan in the best sense of the word, humanitarian and a sponsor of eternal, universal ideas.” After Mr. Armstrong’s death, he wrote, “During the years of our association with him, all of us developed the highest regard for his wonderful personality and qualities. His deep devotion to the ideals of peace and justice in the spirit of the biblical prophets was appreciated by his friends in Israel. … His name will always be attached to this most important undertaking carried out in Jerusalem.”

In addition to support of archaeology, the “iron bridge” partnership had a second goal: to bring the children of Jerusalem—Jew, Muslim and others—together to learn the way of peace. To further that goal, Mr. Armstrong’s Ambassador International Cultural Foundation supported Jerusalem’s International Cultural Center for Youth. The concept of the iccy had been born in the mind of Moshe Kol after the War of Independence in 1948-49, and it was founded in the spring of 1960 with U.S. First Lady Eleanor Roosevelt. Mr. Armstrong supported the work of the iccy and the dream of seeing children of all nations and ethnicities living and playing and growing together in the way of peace. The iccy named the square at the entrance of its building in Jerusalem the Herbert W. Armstrong Square. Visitors to the upscale German Colony today can still see the stone plaque at the edge of the square.

Later, in connection with the same dream of peace for the children of Jerusalem and the world, Mr. Armstrong responded to a request from Jerusalem Mayor Teddy Kollek, who hoped to develop a beautiful park in downtown Jerusalem. The Ambassador Foundation helped fund the construction of Liberty Bell Park, specifically the children’s playground at its northern entrance. Thus, Mr. Armstrong’s name was stamped on two great symbols of hope for the future of the children of Jerusalem.

Mr. Armstrong’s contributions did not go unnoticed by those who sat in the gates of Jerusalem. In fact, following his first meeting in the Knesset in 1968 to his death in 1986, Mr. Armstrong was welcomed by every prime minister and president of Israel for the rest of his life, including prime ministers Golda Meir, Yitzak Rabin, Menachem Begin and Shimon Peres, and presidents Ephraim Katzir, Yitzhak Navon and Chaim Herzog. These meetings and relationships went deeper than a simple handshake and photo opportunity. Israeli leaders valued the work, the counsel and the friendship of Herbert Armstrong.

On Nov. 3, 1980, Prime Minister Menachem Begin was in a meeting with a group of officials in Tel Aviv. An aide passed him a message, and he arose from his chair and recessed the meeting. He walked out and got in his car, and his motorcade drove the hour-long route to Jerusalem. He had learned that Mr. Armstrong was visiting Jerusalem. The prime minister hurried to his executive office, where he received Mr. Armstrong, accompanied by Mayor Kollek and a couple of others. When someone mentioned that he had interrupted his meeting and made the special drive, the prime minister explained, “Mr. Armstrong, I would get out of bed at 2 in the morning to see you.” The meeting ended in an affectionate bear hug. Afterward, Begin drove back to Tel Aviv and resumed his meeting—after a 2½-hour recess.

Mr. Armstrong met with Israeli President Yitzhak Navon a number of times in Jerusalem. In December 1978, Mr. Navon hosted a special tribute dinner for Mr. Armstrong at his presidential palace to celebrate Mr. Armstrong’s 10 years of partnership with Israel. As Mr. Armstrong aged into his 90s, he continued to meet with Israel’s leaders. During President Herzog’s term, Mr. Armstrong was awarded the Medal of the Knesset by Speaker Menachem Savidor in October 1983. The award was accompanied by this citation: “To the Hon. Mr. Herbert Armstrong. In appreciation of his true friendship for the land and people of Israel and his magnanimous gestures which aid and strengthen the spiritual and moral tents of our common culture.”

Accompanying Mr. Armstrong on most of these visits with Israeli leaders was a man who sat in the gate of Jerusalem perhaps longer than anyone else: his friend Teddy Kollek. Called the greatest builder of Jerusalem since Herod the Great, Mayor Kollek strived to beautify the city for all of its inhabitants, Jew, Muslim and Christian. Mayor Kollek was reelected five times, and he counted Mr. Armstrong as a close friend through almost his entire public career.

When Mr. Armstrong visited Jerusalem, Mr. Kollek went far beyond his duty as mayor: He viewed Mr. Armstrong as more than just another foreign dignitary—he treated him as a valued friend and confidant. The two men developed a strong bond that sprung from their mutual love for Jerusalem, a love that was proven in the work they did together for the city. Mayor Kollek visited Ambassador College in California in 1971, and less than two weeks later, Mr. Armstrong was at Hebrew University in Jerusalem. He and other representatives of the Ambassador International Cultural Foundation were conferring with the university’s Institute of Urban and Regional Studies, with which they were in a joint participation city-planning project. The goal: to plan the Jerusalem of the future.

On one occasion, Mr. Kollek presented Mr. Armstrong with a silver and gold sculpture of David defeating Goliath. “All your life, you have been a fighter of giant lies, and of giant untruths,” he said. “And as you regard yourself a descendant of David, and rightly so, here in the City of David, we would like to present you with this symbolic sculpture.” Mr. Armstrong replied by saying that Jerusalem was destined to become “the greatest city in the world and in fact in the whole universe. This city is someday going to be the capital of the universe, because this city is going to exist forever.” The two men’s mutual aspirations for the future of Jerusalem knitted their brotherhood ever closer. This was highlighted in a conversation over lunch in Jerusalem in 1983. Since it was election day, Mr. Armstrong led a toast for the reelection of Mayor Kollek. The mayor responded from his chair, “Jerusalem at this time does not have a prophet—you [Mr. Armstrong] will have to be our prophet.” Mr. Armstrong responded saying he planned to spend the next thousand years in Jerusalem, to which Mr. Kollek quipped, “And I’ll be happy to be mayor!”

At Mr. Armstrong’s death in 1986, Mr. Kollek sent the following condolences: “It is with great sorrow that we learned the passing of President Herbert Armstrong. One could only be deeply impressed by his vast efforts to promote understanding and peace among peoples. His good deeds were felt in many corners of the world. In Jerusalem his care and concern can be seen in the many projects he undertook: the archaeological excavations uncovering the history of millennia, the children’s playground and activities he helped sponsor, the dedicated work of the Ambassador College students. His visits to Jerusalem were always very special and I was privileged to share these with him. He helped foster the goals we set to ensure the future of Jerusalem, King David’s city.”

Shortly before Mr. Kollek’s death, he wrote that he held high regard for this “special man and his mission for peace.” In 2004, he said, “There have been very few people that I have known that I so enjoyed speaking with and so greatly admired and valued their counsel.” Mr. Armstrong felt the same way about his very close friend.

Though he met with the greats of the world from Asia to Africa to Europe and beyond, Herbert W. Armstrong’s greatest affection was for one tiny, new country at the heart of the world. He loved Israel, and Israel loved him back.

Today, though those who Mr. Armstrong entrusted with the Ambassador Foundation, Ambassador College, the Plain Truth and the Worldwide Church of God rejected his legacy and closed all the humanitarian and cultural activities down, the Armstrong International Cultural Foundation is working to keep that work alive. We have continued to support Liberty Bell Park. We have formed a strong bond with Benjamin Mazar’s granddaughter, Dr. Eilat Mazar. We have sent several groups of students from Herbert W. Armstrong College to help with the exciting archeological excavations that she is undertaking in Jerusalem. Foundation chairman Gerald Flurry and staff regularly travel to Jerusalem to personally investigate progress on the foundation’s activities in the eternal city. The foundation will host an archaeological exhibit at its headquarters in Edmond, Oklahoma, this year that will feature artifacts from 10th-century Jerusalem.

In several other ways—from performing arts, to youth camps, to publishing, to broadcasting, to participation in projects in the Holy Land—the Armstrong Foundation and the Philadelphia Church of God continue to raise up the legacy of a remarkable man—an unofficial ambassador for world peace, a great educator, a close acquaintance of world leaders, and a warm friend to Israel.

The Germans Behind the Scenes of the EU

The Germans Behind the Scenes of the EU

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A growing number of Germans are controlling the European Union from behind the scenes, Laurence Norman wrote in the Wall Street Journal August 1.

Few German leaders hold high-profile jobs in the EU, “Yet EU watchers say this first-glance view of German officials on the sidelines is misleading,” writes Norman.

“In addition to the German government pushing its interests more aggressively in private than it does in public, observers note a growing ring of key Brussels players from the EU’s largest member state,” he writes.

Last month, for example, former financial policy adviser to German Chancellor Angela Merkel, Uwe Corsepius, was appointed secretary general of the European Council. The man he replaced, Pierre de Boissieu, was “considered one of the most powerful people in Brussels, partly because of his long years of experience in the European capital and his close ties to French presidents,” writes Norman.

He continues:

But the post itself is also a powerful and influential one. As secretary general of the European Council, which represents the interests of member states, Mr. Corsepius would likely have access to almost any meeting that President Herman Van Rompuy holds, as well as the key EU and eurozone summits. He is in charge of drawing up the agenda for Council meetings and plays a key role in picking personnel. When Mr. Van Rompuy reports in October on how to improve EU crisis management, Mr. Corsepius, who holds a PhD in economics, will likely have his fingerprints somewhere on the recommendations.

Corespius is not alone. Johannes Laitenberger is head of European Commission President José Manuel Barroso’s cabinet. Martin Schulz is expected to become president of the European Parliament toward the end of this year. Jürgen Stark is the chief economist at the European Central Bank (ecb). “Many would consider him the de facto No. 2 once Mario Draghi takes over as ecb president on November 1, even though Vítor Constâncio holds the vice president spot,” writes Norman.

Germany also controls what is emerging as one of the most important Europe institutions—the European Financial Security Facility (efsf). As Stratfor writes, “Unlike previous EU institutions (which the Germans strongly influence), the efsf takes its orders from the Germans. The mechanism is not enshrined in EU treaties; it is instead a private bank, the director of which is German.”

This means that a nation must meet Germany’s terms and conditions before receiving any financial help from the EU. “In order to get the money, distressed states merely have to do whatever Germany—the manager of the fund—wants,” Stratfor writes. “The decision-making occurs within the fund, not at the EU institutional level.”

Norman concludes that “diplomats say that the high-ranking Germans aren’t just pushing Berlin’s interests.” But the euro crisis proves that it is Germany that is calling the shots in Europe.

Cyprus on the Brink, Spain and Italy Suffering

Cyprus on the Brink, Spain and Italy Suffering

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Europe’s financial crisis is far from over.

The Bank of Cyprus warned on August 1 that “there is an imminent threat of Cyprus joining the European Union’s support mechanism, with whatever drawbacks that will entail,” as rising costs of borrowing in Italy and Spain indicate that Europe’s financial crisis has not yet been solved.

“There is no more time left,” said the bank. “We are at a crucial crossroad where we will be judged by history. It is time for immediate and effective action.”

Last Friday, Standard & Poor’s cut Cyprus’s credit rating to bbb+. The day before, Cypriot President Demetris Christofias dissolved the cabinet, saying a new one would be appointed shortly.

The political and economic turmoil comes after an explosion at a naval base on July 11 blew up the country’s main power station. It is expected to cost €1 billion to repair.

Meanwhile, on August 2, Italy’s cost of borrowing reached its highest level since the euro was introduced 11 years ago. Share prices for three of Italy’s biggest banks, Unicredit, Intesa Sanpaolo and Monte dei Paschi, sank so fast that trading was suspended. The interest rate on Italy’s 10-year bonds is 6.3 percent.

Spain is also suffering—the interest on its equivalent bonds reached close to 6.5 percent. “If yields reach 7 percent, a country has effectively lost the support of the international markets,” warned Britain’s Guardian newspaper.

This would send Spain and Italy to the German-run European Financial Security Facility for help—meaning they would have to comply with Germany’s conditions. The worse the European financial crisis becomes, the more nations will be willing to do to get this help from Germany.

Expect Europe’s financial crisis to continue—pushing the continent toward further integration, and toward Germany.

Germany and France Consider Shipbuilding Alliance

Germany and France Consider Shipbuilding Alliance

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France and Germany may merge their shipbuilding infrastructure in the biggest example of industrial cooperation between the two since they established eads, the aerospace group that owns Airbus, according to an article in the Financial Times Deutschland published August 1. German defense firm and steelmaker ThyssenKrupp, French shipbuilder dcns and the German and French governments plan to discuss a shipbuilding alliance later this year, the paper reported.

One proposal for the “eads of the seas” would put dcns in charge of frigate building, and ThyssenKrupp over submarines.

France has pushed for some kind of alliance in this area before, but it has always been rejected by Germany, which is nervous about how much control France will have over the group.

A recent deal between French and German companies to manufacture torpedoes could be used as a test run for a far-reaching cooperation deal.

The possibility of a deal comes after a potential partnership between ThyssenKrupp and Abu Dhabi mar fell apart. The partnership, mentioned a few times by the Trumpet, would have seen the two companies sell military surface vessels to nations in the Middle East and North Africa. ThyssenKrupp cited changes to the political landscape as the reason for canceling the deal.

Germany is still keen on developing a military partnership with Middle Eastern nations, however, as its recent decision to sell battle tanks to Saudi Arabia shows. In the meantime, this kind of a deal between Germany and France would be another step toward European military integration.