Over 75 years ago Wall Street Crashed; but today the New Crash is already underway...

Quote from southamerica:

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February 8, 2008

SouthAmerica: Reply to Mvic

You missed the point that I was trying to make.

I am not comparing Italy with Louisiana.

Let me give you another example maybe you will understand what I am saying.

Here I am quoting from an article of mine published on Brazzil magazine in September 2002 – “Countdown to Armageddon.”

I wrote that article around the time when the economy of Argentina was imploding and that country was going bankrupt – and the Brazilian economy were being affected by the collapse of Argentina a country right next door and an important trading partner of Brazil at that time.

“In January 1999, the economies of Brazil and of California were very close in size; each economy had a gross national product (GNP) of approximately US$ 1.1 trillion. Today, California still has an economy that exceeds US$ 1.2 trillion, even though energy deregulation went out of control in California and almost bankrupted that state. California faces a budget deficit of US$ 24 billion; a figure that represents almost 30 percent of its total budget. If California were not protected by the value of the U.S. dollar, because the U.S. dollar is the currency of California, then we would have a different story.

California is the largest state economy in the U.S. and the second largest is New York, which is about 70 percent the size of California's. If California were an independent country their economy would rank number six in the world in terms of GNP.

If California had its own currency such as the Real, then their currency would be crashing right now. Their banking system would be in shambles as in Argentina, and Californians would be crawling and begging the International Monetary Fund for a bailout. Interest rates in California would be choking any possibility of future growth, unemployment would be exploding, businesses would be going belly-up left and right and California with all the strings attached from the IMF would be headed to economic meltdown and political chaos.

Since Brazil does not have the same type of protection of its currency, you can see very clearly the result to each economy. In the last 3 and 1/2 years California was able to keep its GNP level even with all the economic adversities they had during that period. In contrast, Brazil lost half of the value of its GNP to about US$ 558 billion and its economy is on a free fall.”

As you can see California was a basket case not long ago.

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More...

You are wrong and evidemce of that is to be found in the example of Japan and the UK to name two countries that have sufferred similar economic downturns like California but have not had the consequences of a Brazil or Argentina. The reason is that the per capital level of production in these countires along with the sophistication of their financial system allows them to survive a financial crisis that other countries can not. In part it is because they are not economies that are largely built on commodities and low level manufacturing. In a downturn commodity prices act as a huge drag on the economy of a country that has a large % of its GDP tied to commodity prices. Contrast this with the high value added manufacturing and services (software, hi tech, and financial) that makes up California's economy and it is obvious why tryng to compare the effects of an economic downturn in a 1st world and 3rd work economy doesn't work. Its like comparing the economic value of cheap shoes and productivity software, it makes no sense. Infact you might even say that California might do even better with its own currency as it would not be weighed down by large areas of the US that are far less productive.

I think you are making the mistake of having a political bais and trying to construct a scenario to support it rather than looking at the facts first and going from there.
 
Muchas gracias para tu "posts" Sud America. Yo accuerdo contigo!
Yo pienso que la economica del Estados Unidos chocando tambien!

(Viva FMLN!)

:D
 
Excellent Commentary As Usual
.................................................................................

You bring up excellent points and viewpoints.

By the way, the only currency that Buffett has bought outright is the Brazilian currency...

...................................................................................

One wonders why the basic economics of a country cannot be talked about in a very simple way....such that most everyone that listens can understand them.

Would it not be a simple matter to state a simple economic summary...and thus state what changes one is going to try to effect when one is in office...

ie...the country currently expends

10% on infrastructure
2% on energy policy
10% on humanitarian needs outside the US
2% on humanitarian needs inside the US
76% on military spending
0% will be borrowed for humanitarian needs
100% of budget will be borrowed from other countries this year..
Taxes will rise...change...will be reduced..
We are going to create a war in the middle east which
will cause oil prices to rise sharply...
We are going to implement health care policies that will
require a 70% reduction in incomes to doctors...

etc...etc...etc..

It would seem that this would go a long way to help voters
decide which direction the country is going...and where it will most likely be going..

With the advent of the internet...the idea of having the biggest advertising wallet will no longer be a factor...in winning office...

And in some countries, the person with the most bocinas running around on trucks wins the election game...and along with some small food sacks...one might get some of the tax revenue in his favorite foreign bank.....maybe this could come to an end...

.......................................................................................

All in all...democracies and the internet have a very promising future...
 
Southamerica
Enjoy your posts!
Is there a link to direct to all your articles you have written? Who do you write for?
I know I could go back in ET, but I thought you would have an easier way to see all you written. I have been following Jim Sincalir for years and I am prepared for worst case events. Similar to what you have written
Thanks for your post
 
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Mvic: “I think you are making the mistake of having a political bais and trying to construct a scenario to support it rather than looking at the facts first and going from there.”


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February 8, 2008

SouthAmerica: The facts speak for itself and at this point only fools can’t see what is happening and still are not able to connect the dots.

By the way, I want also to quote the following from that article of mine published on Brazzil magazine in September 2002 – “Countdown to Armageddon.”

“Reckoning Day Postponed

Whom can you believe today when it comes to economic and financial news information? Most people have short memories, and they don't learn from prior experiences. Everything was wonderful with the Asian economies before they had the Asian economic meltdown. Russia was following all the instructions from the West on how to become a capitalist and open market state. Then there was the Russian economic meltdown.

In the last ten years, Argentina was the new star and the showcase for free-market economics, economic restructuring, and government privatizations (the Argentinean government privatized everything in sight; including the zoo in Buenos Aires).

It did not take long for an Argentinean meltdown, which is becoming also a Latin American meltdown. I used to believe in a free market economy, but today I am having second thoughts about this subject.””


****


February 8, 2008

Today (Feb 8, 2008) when I saw the article published on The Financial Times (UK): “GE Money moving to London”, I was not totally surprised by the news.

The article said: “General Electric is moving the headquarters of its core consumer finance division from Connecticut to London….

The decision by one of the largest and oldest companies in the US to relocate a business with $ 25 billion dollars of revenues a year to London ….It is also a boost for the UK capital, which has been challenging New York’s supremacy as a global financial center.

…GE Money’s origins date back to the Depression of the 1930’s when it provided credit to buy GE’s appliances…. "


***

Here we have GE one of the symbols of American capitalism leaving town, and they are bailing out – It does not matter what GE’s spin is regarding this relocation – at the end of the day this GE move represents another canary dying in the coal mine - And the death of this canary should raise a big red flag.

The smart money moves away from trouble and they try to find greener pastures. The GE management has recognized the mess that is in the pipeline for the US economy, and they are bailing out before the shit hits the fan.

When the major US corporations are signaling that the US has reached the end of the line then you have major troubles ahead. IBM’s management recognized that India is becoming more important for them than the United States and that today the United States it is just a place where IBM uses as a source of good paying jobs that they help export to other countries via outsourcing and they want to help the American job market to turn itself very fast into a job graveyard.

IBM and GE these companies represents the highest symbols of American capitalism and for all practical purposes these companies are slowly giving up on the United States.

Very soon even the foreigner countries that have been keeping the US economy afloat for many years are going to start recognizing what is going on, and when these people also finally start bailing out, then the herd will be spooked; the PANIC it will set in and the stamped will start.

It will be the biggest international monetary crisis the world has ever seen, just wait until the fireworks starts and you will see a derivatives market meltdown and the end of an international financial system as we have today. It will be the end of an era and the demise of the last superpower.

A new world order it will rise from the ashes of the first Great Depression of the 21st Century.

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Quote from southamerica:

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Mvic: “I think you are making the mistake of having a political bais and trying to construct a scenario to support it rather than looking at the facts first and going from there.”


********


February 8, 2008

SouthAmerica: The facts speak for itself and at this point only fools can’t see what is happening and still are not able to connect the dots.

By the way, I want also to quote the following from that article of mine published on Brazzil magazine in September 2002 – “Countdown to Armageddon.”

“Reckoning Day Postponed

Whom can you believe today when it comes to economic and financial news information? Most people have short memories, and they don't learn from prior experiences. Everything was wonderful with the Asian economies before they had the Asian economic meltdown. Russia was following all the instructions from the West on how to become a capitalist and open market state. Then there was the Russian economic meltdown.

In the last ten years, Argentina was the new star and the showcase for free-market economics, economic restructuring, and government privatizations (the Argentinean government privatized everything in sight; including the zoo in Buenos Aires).

It did not take long for an Argentinean meltdown, which is becoming also a Latin American meltdown. I used to believe in a free market economy, but today I am having second thoughts about this subject.””


****


February 8, 2008

Today (Feb 8, 2008) when I saw the article published on The Financial Times (UK): “GE Money moving to London”, I was not totally surprised by the news.

The article said: “General Electric is moving the headquarters of its core consumer finance division from Connecticut to London….

The decision by one of the largest and oldest companies in the US to relocate a business with $ 25 billion dollars of revenues a year to London ….It is also a boost for the UK capital, which has been challenging New York’s supremacy as a global financial center.

…GE Money’s origins date back to the Depression of the 1930’s when it provided credit to buy GE’s appliances…. "


***

Here we have GE one of the symbols of American capitalism leaving town, and they are bailing out – It does not matter what GE’s spin is regarding this relocation – at the end of the day this GE move represents another canary dying in the coal mine - And the death of this canary should raise a big red flag.

The smart money moves away from trouble and they try to find greener pastures. The GE management has recognized the mess that is in the pipeline for the US economy, and they are bailing out before the shit hits the fan.

When the major US corporations are signaling that the US has reached the end of the line then you have major troubles ahead. IBM’s management recognized that India is becoming more important for them than the United States and that today the United States it is just a place where IBM uses as a source of good paying jobs that they help export to other countries via outsourcing and they want to help the American job market to turn itself very fast into a job graveyard.

IBM and GE these companies represents the highest symbols of American capitalism and for all practical purposes these companies have giving up on the United States.

Very soon even the foreigner countries that have been keeping the US economy afloat for many years are going to start recognizing what is going on, and when these people also finally start bailing out, then the herd will be spooked; the PANIC it will set in and the stamped will start.

It will be the biggest international monetary crisis the world has ever seen, just wait until the fireworks starts and you will see a derivatives market meltdown and the end of an international financial system as we have today. It will be the end of an era and the demise of the last superpower.
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A new world order it will rise from the ashes of the first Great Depression of the 21st Century.

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More...

Anyone who used the word “Armageddon” in their article title better have some pretty strong facts to back that up. Unfortunately the examples you cite of pas crisis and the naysayers of those times doe not support your hyperbole. Yes the Asian crisis was terrible but look at those countries now a mere decade later. The Russian bond default was devastating but look at Russian today, and lets not discount the hurdles that those countries all had to face in terms of shaky political systems and unsophisticated financial markets and heavy and expensive debts loads, high unemployment, and very low productivity. The US faces none of those obstacles to recovery and will be doings so in an environment of far greater global economic activity.

I am skeptical because I have a long memory, I was active in the markets from 1984 onwards and can remember the many people like you who predicted the next Depression and calamity and the end of America in particular and they have been proven wrong again and again. I am not discounting that we will have a recession and indeed we are probably already in recession but I think you are not seeing the huge number of positive things that the US economy has going for it and only the negative ones. Relatively speaking of course the US isn’t going to enjoy growth rates that are achievable in EMs and the US population needs a fiscal wake up call but I when I try and construct a scenario where the US goes in to depression while the rest of the world keeps growing, well, nothing adds up and the dots do not connect. Call me a fool if you will but I have both history and most of the economic community on my side of the argument. Even big US bears like Buffet and Rogers both of whom I agree with in the short term analysis say that in the long run the US will be fine. What you have on your side of the argument is a lot of hysterical conclusions from a few cherry picked negative facts about the US economy.

My core trading position is EEM 2009 puts and I have held this positing for several months now and plan to hold it for several more. I don't own any US RE having divested all in the last few years but I will be looking to buy back in to the US both RE and equities sometime in the next year or two. When the global slowdown happens it will devastate commodity prices and this in turn will devastate many EMs who will also be faced with the drop off in US AND European consumer demand. Relatively speaking the US should fair well.

It may well be that in 50 years time your scenario of a shift away from the US to other countries will play out but a lot will depend on politics. It may take a lot longer than 50 years too. But I completely dismiss any argument that has the US suffering a depression in the next 2-5 years that relegates it to the 3rd world as, dare I say, foolish? :)
 
Excellent Commentary All
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Currencies are strong or weak if the typical elements of strength or weakness are present...

Also one could say that if the variables remain the same...then this is going to be the outcome...

Valuation will hold the key to the economic issues confronting the US or any other country...

If the currency valuation currency price makers see a country that is improving...and going in a direction of economic strength...then they will support that currency...On the other hand, if the elements of weakness appear...and the country is failing to make the required changes to move towards elements of strength, then the currency will be valued less than its peers...

If the US were to do the following...

Eliminate the IRS...corporate and individual taxation...and change to a consumption tax only....

Eliminate legal largesse versus business...

Provide a level playing field..internet based education...for all students...regardless of family money and contacts of priviledge...
This plays a big role in dividing the people of the US between the haves and the have nots and this difference needs to be eliminated...

Provide a open internet based government....

Provide a better wealth sharing system....All employees are entitled to ownership...

The electronic stock exchanges need to be even further extended to all exchanges and transaction cost should basically be eliminated...

The dollar would advance 2 fold versus the EURO...


Why...because every stellar company in the world would domicile in the US...

The US workforce would be the best educated....US Companies today are run by a college fraternity... This needs to be eliminated...
 
Quote from libertad:

Excellent Commentary All
......................................................................................

Currencies are strong or weak if the typical elements of strength or weakness are present...

Also one could say that if the variables remain the same...then this is going to be the outcome...

Valuation will hold the key to the economic issues confronting the US or any other country...

If the currency valuation currency price makers see a country that is improving...and going in a direction of economic strength...then they will support that currency...On the other hand, if the elements of weakness appear...and the country is failing to make the required changes to move towards elements of strength, then the currency will be valued less than its peers...

If the US were to do the following...

Eliminate the IRS...corporate and individual taxation...and change to a consumption tax only....

Eliminate legal largesse versus business...

Provide a level playing field..internet based education...for all students...regardless of family money and contacts of priviledge...
This plays a big role in dividing the people of the US between the haves and the have nots and this difference needs to be eliminated...

Provide a open internet based government....

Provide a better wealth sharing system....All employees are entitled to ownership...

The electronic stock exchanges need to be even further extended to all exchanges and transaction cost should basically be eliminated...

The dollar would advance 2 fold versus the EURO...


Why...because every stellar company in the world would domicile in the US...

The US workforce would be the best educated....US Companies today are run by a college fraternity... This needs to be eliminated...
More...

Good points Libertad, the only one I would take issue with is the wealth sharing and replace it with better corporate governance and elimination of the proxy system so there would be more accountability by management. Employees collectively often have large stakes in their companies through their 401K but have no real power when it comes to call management to account. I wonder how the Lucent story would have played out differently if employees had been able to use their 401K stock to discipline management before it was too late. The other way that employees can own stick is by starting a company and there is still no better place on earth to start a company that the US.

Your main point is well made, that the US has significant options.

I will make this concession to SA's argument, if we end up with another 8 years of Bush like fiscal irresponsibility along with crippling taxes, programs that stifle the economy and investment, and poor education, and an SEC that allows certain market participants to engage in conduct that undermines the credibility of the US markets I would say the shift away from the US is likely going to come sooner rather than later. I didn't agree with Ron Paul about a lot of things but fiscally he was right on, too bad he didn't get more of a showing in the primaries. Hopefully he will take him money raised and use it to keep the nominees policy spotlight focused where it should be.
 
Mvic,

I agree with you on some points.
I think that economists tend to focus on the data that supports their views (like it happens in most sciences), and tend to conduct further studies in order to find more evidence supporting those views. The fact that an author [or researcher] has a bias in inevitable. There is no such thing as the objective truth that was so sought after by the positivist movement, as the truth is always distorted by both the lenses of the author and the lenses of the reader.

S.A.'s claim is based on his observation of data, the fact that such observations did not come to pass exactly as observed doesn't disqualify him as an observer, or disqualify his observations. His observation in 2002 was valid, and it's still valid today.

I agree with SA in the perspective that a depression is due; as it is my belief that a depression is a part of the economic cycle and it serves a purpose [it gets fat out of the system]. Some characters of the caliber of Irvin Fisher and John Keynes have claimed before that we have reached a state were economic depressions are a thing of the past; only to be proven wrong shortly afterwards - only a few days in the case of Fisher - and not only that but they continue to make Cramerish calls for a turn around and a return of the bull market for the whole extend of the Great Depression.

So I figure it works both ways, during a market were bullish sentiment prevails there are those who focus on the bearish data [that is there and is real] as there are those who focus on real bullish data during a sustained bear market. The issue however is not whether or not that data is accurate [we can assume that it is, for the sake of argument] but whether that data is significant enough to alter the prevailing sentiment of the market.

Observing the economic and fundamental data that's presented to an observer is a difficult task, given the huge amount of data available. But inferring it's impact on market sentiment is an impossible task [since it's variables come in greater numbers around 6 billion - one for every person; multiplied by their buying power]; one can only establish reasonable expectations but cannot achieve a certain prediction by mathematical models and logical models but only observe the market's reaction and compare it to one's expectations.









PS.

A nice example of distortion from the lense of the reader can be seen when someone writes "A depression [recession] is due because of this and that" and people for some strange reason seem to understand "I want a depression [recession] to come because I hate the people of this and that economy because of this and that"
 
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February 10, 2008

SouthAmerica: Reply to trader123abc

Enclosed is a list of some of my published articles, there are enough material here to keep you busy for a while.

Most of my articles have been published by Brazzil magazine, The Brasilians, and various other newspapers and magazines, here in the United States, in the Middle East, and in very soon also in Asia.

Brazzil magazine is one of the most successful Brazilian magazines in the Internet, and they get an average of 25,000 readers per day. I receive emails and letters to the editor regarding my articles from people in the United States, Canada, Asia, Middle East, Europe, and also from people in Brazil.

Most of my articles are about Brazilian history, the Brazilian economy, International economics, and foreign affairs. Here is an example and short list of my published articles:


Important - Must read articles about Brazil, China and the future. If you are interested in Brazil and China then you should read the following articles published on Brazzil magazine:

On March 2, 2007 Brazzil Magazine
“Here Is Why Brazil Should Adopt the New Asian Currency”
Written by Ricardo C. Amaral

http://www.brazzil.com/content/view/9821/80/


Then as a follow up to the above article I wrote a 4-part series of articles detailing a plan for China’s $ 200 billion dollars investment in Brazil.

These investments should be viewed from China's perspective not just as another investment to maximize its returns on invested amounts. It should be viewed by China as a matter of national security and long-term survival for its people.

The Smartest Thing China Could Do Right Now: Invest US$ 200 Billion in Brazil - Written by Ricardo C. Amaral

Monday, 01 October 2007 - Part 1 of 4
http://www.brazzil.com/content/view/9977/80/

Friday, 05 October 2007 - Part 2 of 4
http://www.brazzil.com/content/view/9979/80/

Thursday, 11 October 2007 - Part 3 of 4
http://www.brazzil.com/content/view/9983/80/

Tuesday, 16 October 2007 - Part 4 of 4
http://www.brazzil.com/content/view/9985/80/

Note: So far there are over 800 comments from the readers following these articles.


On September 6, 2006 Brazzil Magazine published an article about the Brazilian economy, the US economy and globalization – you can read it on the following web site:

Brazzil Magazine - Wednesday, September 06, 2006
“While the American Dream Is Outsourced Brazil Drives the World into the Future”
Written by Ricardo C. Amaral

http://www.brazzil.com/content/view/9684/78/


“While China Rises the US Falls in Brazil and Latin America”
Published on June 2, 2005
http://www.brazzil.com/content/view/9296/76/


May 2005 – “US and EU are the Past. The future is Brazil and Bric”
http://www.brazzilmag.com/content/view/2346/49/


Maybe you will find interesting the article that I wrote about the coming worldwide economic depression.

Published on February 17, 2005 on Brazzil magazine.
“The First Great Depression of the New Millennium”
By Ricardo C. Amaral

http://www.brazzilmag.com/content/view/1424/49/


Here is an article that had a major impact in Brazil and in Saudi Arabia:

June 2003 – “Dear Saudis, Play Safe Bring Your Money to Brazil”
http://brazzil.com/p117jun03.htm


Note: When the above article was published I received an invitation at that time from the government of Saudi Arabia for me to visit Saudi Arabia and meet with the government officials responsible for Saudi Arabian investments.

I did not accept the invitation because of the Iraq war, but I did keep in contact with the Saudis that contacted me, and in the summer of 2004 I did meet with one of the senior Saudi officials here in New Jersey. He was going through an investment road show for his government here in the United States, and he stopped in New Jersey just to meet me in person. I still correspond on a regular basis with my friends from Saudi Arabian and Bahrain.

There are various Arab newspapers that are publishing my articles in the Middle East today. But one of them “ArabNews” is one of the most influential newspapers Middle East and on the Arab world.



May 2005 - “The Arab Latin Summit, Brazil and the Future”
http://www.arabnews.com/?page=6&section=0&article=63528&d=10&m=5&y=2005


April 2005 - “Brazil to Host Arab-South American Summit Next Month”
http://www.arabnews.com/?page=6&section=0&article=62405&d=19&m=4&y=2005



***


In the last 8 years I wrote at least 12 articles about: Why Brazil should adopt the Euro and later the new Asian currency as the Brazilian new currency. Here are some articles about the Brazilian currency:

June 2002 - “The Euro Now”
http://www.brazzil.com/content/view/6353/67/


June 2003 – “Should Brazil Adopt a New Currency?”
http://www.brazzil.com/content/view/564/32/


***


Articles about Brazilian history:

January 2003 - “The Brazilian Ruling Class”
http://www.brazzil.com/content/view/2149/27/


July 2000 – “The Greatest Man in Brazilian History”
http://www.brazzil.com/content/view/6955/73/


Note: The above two articles are about the members of my family in Brazil.


July 2000 – “Overpopulated”
http://www.brazzil.com/content/view/6963/73/



***


September 2001 – “The B-Files”
http://www.brazzil.com/content/view/6752/39/

This is an article about an organization that I did try to take off the ground and I worked on that project for the entire year of 2001 – “The Brazilian Cultural Society”

After 9/11 became impossible to find any source of funding for the project at that time, even though I had been able to organize an outstanding group of people who had accepted to be members of the board of trustees of that non-profit organization including former Brazilian president Jose Sarney. (Today former president Sarney is a senior Senator, and he is the most influential politician in Brazil. I usually meet him in New York during his frequent trips to New York City.)



***

Articles about Brazil and Nuclear Weapons:

May 2002 – “We Need the Bomb – Part I”
http://www.brazzil.com/content/view/2575/38/


February 2003 – “We Need the Bomb – Part II”
http://www.brazzil.com/content/view/2186/27/


June 2003 – “Food for Nukes the Answer for Brazil”
http://brazzil.com/p104jun03.htm


Note: Thousands and thousands of people around the world it did read my articles regarding Brazil and nuclear weapons.


***


Other articles:


April 2005 – “South Meets South at Arab-Latin Summit in Brazil”
http://brazzilmag.com/content/view/2044/49/


March 2005 – “Outsourcing is ruining the US and Brazil’s economy”
http://www.brazzilmag.com/content/view/1821/49


November 2004 – “Brazil Loses Celso Furtado, One of its Brightest Intellectual”
http://www.brazzilmag.com/content/view/805/41/


August 2003 – “Roberto Marinho – The Most Powerful Man in Brazil”
http://www.brazzil.com/content/view/883/27/


June 2003 – “I Nominate Brazilian Furtado to the Nobel”
http://brazzil.com/p116jun03.htm


June 2003 – “Brazil and the Angolan Connection”
http://www.brazzillog.com/2003/html/articles/jun03/p133jun03.htm


April 2003 – “The Art of Deception”
http://www.brazzil.com/content/view/3528/27/


January 2003 – “Getting Ready for War”
http://www.brazzil.com/content/view/2143/27/


December 2002 – “Our Future is Now”
http://www.brazzil.com/content/view/6226/38/


November 2002 – “The Big American Lie”
http://www.brazzil.com/content/view/6211/38/


September 2002 – “Countdown to Armageddon”
http://www.brazzil.com/content/view/6309/38/


March 2002 – “Folly”
http://www.brazzil.com/content/view/6464/38/


****


I hope you will enjoy reading some of these articles and please let me know if you enjoyed reading these articles.


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