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Idiocy is usually described as "endlessly repeating the same process, hoping for a different result". Lawrence Summers, Timothy Geithner, Nancy Pelosi, Joe Biden et al are straining at the leash to get the Bailout Ball rolling once again. The stabilization of the financial sector, as elusive as it has been so far, has become the Holy Grail of Economic salvation. That makes $8.5 Trillion worth of trying and $0 of result. The Knights of the Oval Table are gathered to plan their mission as their beleaguered subjects are trying to batter down the castle gates. It's no small wonder that Geithner wants to get the money out the door as soon as the end of this week.
The most recent report from the Comptroller of the Currency seems to have gone unnoticed in Washington and the press. If banks are not lending because of increased capital requirements in the face of Credit Default Swaps, other derivatives and loan defaults then the report goes a long way in describing exactly why.
Credit Exposure to Capital ratio. Amounts in $Millions
Bank | Assets | Derivatives | Credit Exposure to Capital Ratio |
J.P. Morgan Chase | $1,768,657 | $87,688,008 | 400.2 |
Citi | $1,207,007 | $35,645,429 | 259.5 |
Bank Of America | $1,359,071 | $38,673,967 | 177.6 |
HSBC | $181,587 | $4,133,712 | 664.2 |
The assets comprise largely of Real estate, residential mortgage, student, car and credit card loans. With the rise in defaulting mortgages, delinquent credit card and other debt the problem can only get worse. To recapitalize the banks to the point where exposure is low enough to encourage lending would take trillions and that's before any more fallout from the collapsing economy. Lending also requires creditworthy borrowers, the number of which is in a nosedive. The $165 Trillion in notional derivatives and the associated credit risk related to $15 Trillion in Credit Default Swaps illustrated below is the poison apple that the taxpayer has been forced to bite into.
Bank | Total Credit Derivatives |
J.P. Morgan Chase | $9,177,731 |
Citi | $2,939,783 |
Bank Of America | $2,480,672 |
HSBC | $1,152,948 |
When the "credit crunch" began and Washington began the rush to solve the problem with taxpayer cash, no accounting of this derivative nightmare was ever brought to bear. In all the deliberations and press releases there was not a single mention of the fact that the primary cause of the bank collapse was due to these "instruments of mass destruction". It was widely discussed in the blogosphere but, like the real reasons for invading Iraq, never made it in to the mainstream media. As with Iraq, one would have to assume that the reason was to obfuscate the facts and cajole a shocked public in to accepting as a remedy whatever was proposed by Paulson, Bernanke and Bush. The latter had to be completely aware of the OCC data at the time and to assume that they did not is simply not credible. It would have been completely obvious that $700 Billion would do absolutely nothing to alleviate the crisis. As witnessed in the ensuing months since the TARP bill, how the money was used has been obfuscated and concealed.This was always a scam.
Even as the economic indicators broke one record after another, the recipients of the TARP funds were selling Credit Default Swaps to each other, betting on each other's downfall. They knew the game was up and wanted to profit on the way down as much as they had on the way up. All the major Banks on Wall St. are seeing mounting losses and the failure of one will increase the losses of the other. They are joined at the hip and will fall like a house of cards.
The question begs to be asked, and this is where the cynic in me dominates, what's the plan? When they do fall will the Government nationalize the last one standing for the good of the country and socialize even more of the losses? This would be the coup of the millennium and give birth to a new Governmental paradigm. To have this complete before the economy and society have completely broken down would be a good reason to declare a real National Emergency and declare Martial Law, the legislation, executive orders and infrastructure of which are already in place. How can one not be a cynic when we reflect on what has happened so far?
The numbers are in and the scam stands exposed to those who will look. Which way the story unfolds from here is anyone's guess. But I am ready to bet that Congress will not include the OCC data in the upcoming debate on the next round of cash for the Banks.
Treasury Secretary Henry Paulson blew it, Ben Bernancke blew it and now it looks like Lawrence Summers and David Axelrod, Obama's top economic advisers, are about to blow it big time. The horse is long since dead but the flogging continues.
“The focus isn’t going to be on the needs of banks; it’s going to be on the needs of the economy for credit,” Lawrence Summers on Face the nation, 19th January. In the same segment, both he and David Axelrod agree that Paulson's use of the first $350 Billion of the TARP money was a failure..
"The point is to get credit flowing again to businesses and families across the country -- that hasn’t happened with the expenditure of the first $350 billion"
The proposal ? Set up an "aggregator" or " Bad" bank in to which Wall St. can pour it's toxic waste or keep it on their balance sheets while being guaranteed by the taxpayer. Looks like the focus is going to be on the banks after all. The fact that the banks would be unloading more than a trillion dollars in worthless junk, paid for by the taxpayer, does not seem to Summers and Axelrod as a particularly bad idea.
The emphasis on getting credit flowing again for car loans, consumer credit and mortgages ony serves to aggravate the basic problem that these pundits seem to be ignoring; Consumers are flat broke and overindebted as it is, they don't need more credit; they need more jobs. The Banks don't need any more free money; they need to be put in to bankruptcy to purge the system of the junk on which they have based their business model. The reason the banks refuse to lend is that they are holding on to the money to cover their accelerating losses. As each company fails, as each debtor loses their job the dominos are falling faster and are obliterating the banking sector.
When the original disastrous TARP was pushed by the Treasury the indispensable actions that were not taken were regulation, revelation of the Banks' balance sheets and oversight as to how the money was being used. Any rational investor would want to know what they were investing in but this minimum requirement was brushed aside in the rush to hand over taxpayer funds. As if this were not enough to start alarm bells ringing the refusal of the Fed and the financial sector recipients to open the books to public scrutiny puts the bailout on the same stage as Bernie Madoff. The latter engaged in fraud to rob his investors just as blatantly as the fraudelent bailout robbed the taxpayers. Now we are expected to believe that, without further ado, repeating the same failed policies is needed to cure the economic woes of the country.
Let's examine the results of similiar policies in Europe.
The U.K, Ireland, France and Germany are among the other victims of the same mistakes. Ireland and the U.K., after pumping billions in to the banking sector, have only succeeded in pushing themselves to the verge of bankruptcy and reduced the available capital to do anything actually constructive. Nicolas Sarkozy succeeded in getting Societe Generale to break even by injecting taxpayer cash . What kind of logic is it that says that this is a good thing ? Any unprofitable company can break even if it receives taxpayer money to blot out the red ink. The fact remains; it is an unprofitable enterprise and, by any interpretation of market rules, should fail to free up more profitable ones.
The formation of the "Bad Bank" will prove to be another miserable failure. The time to call a halt to the madness is long since past and more rational policies need to be coming from Washington before the country goes bankrupt.
“The focus isn’t going to be on the needs of banks; it’s going to be on the needs of the economy for credit,” Lawrence Summers on Face the nation, 19th January. In the same segment, both he and David Axelrod agree that Paulson's use of the first $350 Billion of the TARP money was a failure..
"The point is to get credit flowing again to businesses and families across the country -- that hasn’t happened with the expenditure of the first $350 billion"
The proposal ? Set up an "aggregator" or " Bad" bank in to which Wall St. can pour it's toxic waste or keep it on their balance sheets while being guaranteed by the taxpayer. Looks like the focus is going to be on the banks after all. The fact that the banks would be unloading more than a trillion dollars in worthless junk, paid for by the taxpayer, does not seem to Summers and Axelrod as a particularly bad idea.
The emphasis on getting credit flowing again for car loans, consumer credit and mortgages ony serves to aggravate the basic problem that these pundits seem to be ignoring; Consumers are flat broke and overindebted as it is, they don't need more credit; they need more jobs. The Banks don't need any more free money; they need to be put in to bankruptcy to purge the system of the junk on which they have based their business model. The reason the banks refuse to lend is that they are holding on to the money to cover their accelerating losses. As each company fails, as each debtor loses their job the dominos are falling faster and are obliterating the banking sector.
When the original disastrous TARP was pushed by the Treasury the indispensable actions that were not taken were regulation, revelation of the Banks' balance sheets and oversight as to how the money was being used. Any rational investor would want to know what they were investing in but this minimum requirement was brushed aside in the rush to hand over taxpayer funds. As if this were not enough to start alarm bells ringing the refusal of the Fed and the financial sector recipients to open the books to public scrutiny puts the bailout on the same stage as Bernie Madoff. The latter engaged in fraud to rob his investors just as blatantly as the fraudelent bailout robbed the taxpayers. Now we are expected to believe that, without further ado, repeating the same failed policies is needed to cure the economic woes of the country.
Let's examine the results of similiar policies in Europe.
The U.K, Ireland, France and Germany are among the other victims of the same mistakes. Ireland and the U.K., after pumping billions in to the banking sector, have only succeeded in pushing themselves to the verge of bankruptcy and reduced the available capital to do anything actually constructive. Nicolas Sarkozy succeeded in getting Societe Generale to break even by injecting taxpayer cash . What kind of logic is it that says that this is a good thing ? Any unprofitable company can break even if it receives taxpayer money to blot out the red ink. The fact remains; it is an unprofitable enterprise and, by any interpretation of market rules, should fail to free up more profitable ones.
The formation of the "Bad Bank" will prove to be another miserable failure. The time to call a halt to the madness is long since past and more rational policies need to be coming from Washington before the country goes bankrupt.
The announcement in the last few days of a deal reached between the U.S. Treasury and the moribund insurance giant, A.I.G. provides a very lucid insight in to the nefarious and destructive world of the Troubled Asset Relief Program, otherwise known as T.A.R.P..Not only have A.I.G. received $152 billion to date and subsequently reported a third quarter loss of $25 billion, now they are to be cleared of their obligation on $53 billion worth of toxic credit default swaps. U.S. taxpayers are now on the hook for $205 billion courtesy of an institution which played in the Wall St. casino that passes for a "Financial Sector" and lost. Under the "Free market" system, so expounded upon by Government and Wall St. alike, A.I.G should be in chapter 11. Bailing out A.I.G and other failing institutions does absolutely nothing to address the fundamental issues at hand.
The economy is in crisis because unemployment and overarching debt levels pushed thousands of families in to the untenable situation where they did not earn enough to cover their debts. This burst the real estate bubble inflated by Alan Greenspan, crashed real estate prices, consumer spending and manufacturing. What we are seeing now is the inevitable result of lack of Financial regulation, lax monetary policy and a symbiosis between Government and the Financial industry. The mortgages taken out by buyers had been bundled into complex financial instruments; Mortgage backed securities. The latter along with Credit default swaps and derivatives set the stage for a global financial meltdown. The Glass-Steagal act of 1933 had been conceived to prevent the Banking sector from indulging in high risk investments to protect the depositors of these institutions. This was repealed at the end of the Clinton Administration through the Gramm-Leach-Bliley Act of 1999 which opened the gates to financial destruction. With the stroke of a pen, the financial services sector was given the power to literally bring down an economy .
The most urgent matter for Treasury to address is the toxic derivatives market. The notional amount of outstanding derivatives, as noted by the Bank of International settlements, comes close to $512 trillion. This represents a figure that is impossible to settle and is the real Armageddon which Banks are preparing for by hoarding the cash that they have received through the T.A.R.P..Unless this time bomb is defused by bringing the undeclared positions on the table, the duration and gravity of this crisis can only increase. As the underlying assets of these instruments crumble the Banks' exposure to counterparty risk increases and will lead to the inevitable collapse of even more banks and reduce the availability of investment credit even more. The underlying assets include interest rates, mortgages, foreign exchange rates, credit ratings on companies and even creditworthiness of entire countries. This is the level of insanity that has passed for "Leveraged Investment"
With over $3 trillion of taxpayer money injected in to Banks, insurance companies, commercial paper, Fannie and Freddie what has come back to benefit the dying economy ? A reduction in lending, increased interest rates on credit card payments and further losses for these same institutions. No big surprise as the real economy has never stopped it's nosedive. Does the Treasury really not realise that there is no point in investing in companies that have no chance of redemption ? By handing over Americans' hard earned tax dollars and indebting future generations, the Treasury has been engaging in the biggest transfer of wealth in Human history. The U.S. is now the biggest debtor on the planet and the rest of the world has noticed. China, Japan and the Oil kingdoms that buy U.S. debt are losing faith and it's only a matter of time until they turn off the tap.
The economy is in crisis because unemployment and overarching debt levels pushed thousands of families in to the untenable situation where they did not earn enough to cover their debts. This burst the real estate bubble inflated by Alan Greenspan, crashed real estate prices, consumer spending and manufacturing. What we are seeing now is the inevitable result of lack of Financial regulation, lax monetary policy and a symbiosis between Government and the Financial industry. The mortgages taken out by buyers had been bundled into complex financial instruments; Mortgage backed securities. The latter along with Credit default swaps and derivatives set the stage for a global financial meltdown. The Glass-Steagal act of 1933 had been conceived to prevent the Banking sector from indulging in high risk investments to protect the depositors of these institutions. This was repealed at the end of the Clinton Administration through the Gramm-Leach-Bliley Act of 1999 which opened the gates to financial destruction. With the stroke of a pen, the financial services sector was given the power to literally bring down an economy .
The most urgent matter for Treasury to address is the toxic derivatives market. The notional amount of outstanding derivatives, as noted by the Bank of International settlements, comes close to $512 trillion. This represents a figure that is impossible to settle and is the real Armageddon which Banks are preparing for by hoarding the cash that they have received through the T.A.R.P..Unless this time bomb is defused by bringing the undeclared positions on the table, the duration and gravity of this crisis can only increase. As the underlying assets of these instruments crumble the Banks' exposure to counterparty risk increases and will lead to the inevitable collapse of even more banks and reduce the availability of investment credit even more. The underlying assets include interest rates, mortgages, foreign exchange rates, credit ratings on companies and even creditworthiness of entire countries. This is the level of insanity that has passed for "Leveraged Investment"
With over $3 trillion of taxpayer money injected in to Banks, insurance companies, commercial paper, Fannie and Freddie what has come back to benefit the dying economy ? A reduction in lending, increased interest rates on credit card payments and further losses for these same institutions. No big surprise as the real economy has never stopped it's nosedive. Does the Treasury really not realise that there is no point in investing in companies that have no chance of redemption ? By handing over Americans' hard earned tax dollars and indebting future generations, the Treasury has been engaging in the biggest transfer of wealth in Human history. The U.S. is now the biggest debtor on the planet and the rest of the world has noticed. China, Japan and the Oil kingdoms that buy U.S. debt are losing faith and it's only a matter of time until they turn off the tap.
The Baltic Dry Index continues to lower as the demand for raw materials continues to drop to unseen levels.
"Capesize Vessels" weigh from 175,000 tons to 400,000 tons and count as some of the largest craft in the World. They typically carry raw materials such as Iron ore, Steel, Coal and other raw commodities. Where you used to pay up to $230,000 per day to rent one, now you can have one for a measly $2800 per day. Lloyds even reported yesterday that one Capesize vessel was going for $1000 per day. These levels of payment are crippling the Shipping Industry and leading to cancelled orders with Shipyards where it is cheaper to let the shipbuilder keep the deposit. More and more older carriers are being scrapped as their value decreases. In October alone, more shipping tonnage was scrapped than in the previous 2 years. The inevitable result of this will be less tonnage available to transport raw materials. From an economic standpoint, supply will decrease thus theoretically lead to a commensurate increase in leasing prices, thus forcing the Baltic Dry Index up again.
In the meantime though, there will be a large increase in job losses in the shipping industry, both on land and on sea. This will only represent a small percentage of the Total unemployment figures around the world but, as the latter is increasing at breakneck speed already, the demand for raw materials will inevitably be dropping. Each factory that closes down, each car that is not sold, each housing start that does not start and each road project cancelled because of restricted public funds, all contribute to this decline and can only be expected to recover when the Economic fundamentals have recovered.
The other factor in the demise of shipping is the denial of Letters of Credit between banks that need to be fulfilled before a vessel leaves port. The general hope within the industry is that once the banking crisis has stabilised and money is flowing again, the Index will recover. But credit market have been getting steadily worse. Economic indicators have become harbingers of doom and Banks are hunkering down to weather the Credit Default Swap and Derivatives storm as well as they can. Astonishingly, Citi, after receiving Billions in taxpayer money to try and get them out of a hole, are now using the money to create new derivatives. Does the entire banking community need to be escorted to Gamblers Anonymous ? The FDIC is reporting that the number of Banks at high risk has been increasing and the number of failed banks has already reached 49 as of 1 October. Banks are also suffering loan and credit card defaults at record and ever increasing levels. Provisions for future losses are increasing and profits are seriously declining or, in most cases, have turned in to huge losses. All of this augurs badly for any Banking recovery anytime soon.
Exposure to Derivatives and CDS's are significantly larger than they were in the same period in 2007, when the system was in a better state and thus the system has started to fall off a precipice with no sign of the bottom in sight. Once fallen, there is no stopping it unless the toxic financial bundles are purged from the system. The lack of will to do this is accelerating the systemic failure. There is not enough money on the planet to cover the derivatives market pure and simple. The Shipping industry is just another cog in the economic machine. As the machine grinds to a halt, the cogs inevitably stop turning.
In the meantime though, there will be a large increase in job losses in the shipping industry, both on land and on sea. This will only represent a small percentage of the Total unemployment figures around the world but, as the latter is increasing at breakneck speed already, the demand for raw materials will inevitably be dropping. Each factory that closes down, each car that is not sold, each housing start that does not start and each road project cancelled because of restricted public funds, all contribute to this decline and can only be expected to recover when the Economic fundamentals have recovered.
The other factor in the demise of shipping is the denial of Letters of Credit between banks that need to be fulfilled before a vessel leaves port. The general hope within the industry is that once the banking crisis has stabilised and money is flowing again, the Index will recover. But credit market have been getting steadily worse. Economic indicators have become harbingers of doom and Banks are hunkering down to weather the Credit Default Swap and Derivatives storm as well as they can. Astonishingly, Citi, after receiving Billions in taxpayer money to try and get them out of a hole, are now using the money to create new derivatives. Does the entire banking community need to be escorted to Gamblers Anonymous ? The FDIC is reporting that the number of Banks at high risk has been increasing and the number of failed banks has already reached 49 as of 1 October. Banks are also suffering loan and credit card defaults at record and ever increasing levels. Provisions for future losses are increasing and profits are seriously declining or, in most cases, have turned in to huge losses. All of this augurs badly for any Banking recovery anytime soon.
Exposure to Derivatives and CDS's are significantly larger than they were in the same period in 2007, when the system was in a better state and thus the system has started to fall off a precipice with no sign of the bottom in sight. Once fallen, there is no stopping it unless the toxic financial bundles are purged from the system. The lack of will to do this is accelerating the systemic failure. There is not enough money on the planet to cover the derivatives market pure and simple. The Shipping industry is just another cog in the economic machine. As the machine grinds to a halt, the cogs inevitably stop turning.
For the last few months now we have seen the unfolding of the inevitable result of monetary deregulation, unbridled and insane speculation, cover ups by the mainstream Media and lastly, the specter of hope and change as embodied in the new President Elect, Barack Obama. Does the latter have the ability to turn around decades of carpetbagger capitalism and bring the power back to the people ?
Not in the sense that has been alluded to in the vacuous electioneering slogans or the tear jerker acceptance speeches. An Economic recovery means that the economy works, not just that the Financial sector is back on track to wreak even more havoc and continue to reap their rewards off of the backs of working people. The electorate is expecting things to go back to the way it was. Big houses, Big cars, Big wages to pay for all the Big and expensive luxuries that are an integral part of the "American Dream". Wasn't it Donald Rumsfeld who said "The American way of life is not up for negotiation!" Such Hubris is the fatal ingredient in the expectations that have been loaded on to Obama's back. Things can never be the same until the way wealth is earned has been changed from the ground up. Gone are the days of borrowing your way to wealth. This was always an unsustainable system.
There is no getting away from the basic fundamentals of a system which marries work, production, saving and growth. Period. Borrowing trillions of dollars from other countries to "jump start" the economy by injecting "liquidity" and "credit" in to it's heart is no cure for the inability of people to borrow even more money. Banks lend money. Banks are the problem. Banks need to be let go in to chapter 11 to detox and then recreated in to something resembling a rational business venture under public scrutiny.People have to earn the money in a functioning economy, pure and simple. Because of the propogation of a credit based economic model, people who actually still have jobs are working, many with 2 or even 3 jobs, for seven days a week in an effort to pay off a mortgage of say, $100,000 while living in a house worth say, $40,000. Is this productive work ? Is this how an economy grows in to a healthy, self sustaing organism ? Obviously not.
If we take it back to the 1950's , after the second World War, we see an entirely different model of consumption and production. People were inclined to save, to put money by for the things that they aspired to. There was a culture of prudence that has dissappeared in modern times. The expectations back then were based on the principle that, if you wanted something, you had to work for it. The idea of going in to debt and paying 20% interest would have seemed insane. The economy could grow under this rational influence. It flourished like a rice paddy after the rain. It fed on the fruits of financial wisdom and a steadier hand on the economic tiller. It was a system where goods were manufactured and surpluses were exported. If there was a need for something, it got "Made in the U.S.A.".
These were more balanced times and market corrections could be made while preserving the integrity of the system because the fundamentals were still extant. What we have now is a system that was deliberately spun out of control for the benefit of the few who controlled the money supply and the means of production. We saw the acceleration headlong in to the miasma of derivatives, credit default swaps, mortgage backed securities and all the rest of the lethal arsenal of the Financial Profiteers. Along with this departure from real money came the search for bigger profits at any cost. Why employ an American worker when you can get 20 exploited foreigners for the same price ? Looks good on a balance sheet and a P/E ratio. But, who makes their money in the stock market ? Not Mabel Jones in Boise, Idaho who's raising 6 children alone after her husband died of work related asbestos poisoning and all the family savings went on medical bills or Joe Kubek in Greensburg, Kansas, whose small farm could not compete with the Agribusiness giants or John Mulzer in Silicon Valley, California, who lost his high paying job in software development and got thrown out of his house with little or no chance of finding another job to get back on his feet. These are the people who need the help, the bailouts, the largesse and the support of their elected officials. If these are not the people who are the absolute number one on the list of priorities right now, then all the flags, the parades and the speeches have been for nothing.
Aided by the occupants of public office who came through the revolving door on Wall St., this rush to riches was instigated with ever increasing ferocity. Paul Volcker and Lawrence Summers both hail from the banking cartel of the Federal Reserve and the World bank. Summers , while working for the World Bank, quite liked the economic savings to be made by exporting toxic waste to third world countries because the population didn't live that long anyway. Volcker was instrumental in deregulating the markets and unleashing the curse of derivatives. Come to think of it, the latter was under the auspices of a Democratic president. Oh yes, these are exactly the guys that are needed to bring sanity back in the front door and kick out Mr Bad from the arena. Barack Obama is telling the American people that it is possible, with some monopoly money, to bring back the good times of credit laden consumption. One, he cannot possibly be serious and two, how long does he think he can continue to take money from other countries without having the means to ever pay it back. By surrounding himself with the omnipresent clique of liars and crooks he has singularly distinguished himself by reneging on his election promises before he's even sworn in. He knows perfectly well what would be required to reconstruct, (not "jump start") the U.S. economy, and Hell will freeze over long before he would ever say it.
It's been way too long since the U.S. brought forth a leader that actually talked sense to the electorate. It is way past time for the U.S to bring forth a leader who will be honest with the electorate; the truth needs to be spoken here. It's way past time for vacuous editorialising, empty promises, cronyism, kleptocracy, apathy, death by television, SUV's, mindless faith in Capitalism, the Free Market and the sincerity of politicians. Something has got to give and Barack Obama needs to level with his fellow citizens and guide them through the bleak future that awaits to collect it's dues.
Not in the sense that has been alluded to in the vacuous electioneering slogans or the tear jerker acceptance speeches. An Economic recovery means that the economy works, not just that the Financial sector is back on track to wreak even more havoc and continue to reap their rewards off of the backs of working people. The electorate is expecting things to go back to the way it was. Big houses, Big cars, Big wages to pay for all the Big and expensive luxuries that are an integral part of the "American Dream". Wasn't it Donald Rumsfeld who said "The American way of life is not up for negotiation!" Such Hubris is the fatal ingredient in the expectations that have been loaded on to Obama's back. Things can never be the same until the way wealth is earned has been changed from the ground up. Gone are the days of borrowing your way to wealth. This was always an unsustainable system.
There is no getting away from the basic fundamentals of a system which marries work, production, saving and growth. Period. Borrowing trillions of dollars from other countries to "jump start" the economy by injecting "liquidity" and "credit" in to it's heart is no cure for the inability of people to borrow even more money. Banks lend money. Banks are the problem. Banks need to be let go in to chapter 11 to detox and then recreated in to something resembling a rational business venture under public scrutiny.People have to earn the money in a functioning economy, pure and simple. Because of the propogation of a credit based economic model, people who actually still have jobs are working, many with 2 or even 3 jobs, for seven days a week in an effort to pay off a mortgage of say, $100,000 while living in a house worth say, $40,000. Is this productive work ? Is this how an economy grows in to a healthy, self sustaing organism ? Obviously not.
If we take it back to the 1950's , after the second World War, we see an entirely different model of consumption and production. People were inclined to save, to put money by for the things that they aspired to. There was a culture of prudence that has dissappeared in modern times. The expectations back then were based on the principle that, if you wanted something, you had to work for it. The idea of going in to debt and paying 20% interest would have seemed insane. The economy could grow under this rational influence. It flourished like a rice paddy after the rain. It fed on the fruits of financial wisdom and a steadier hand on the economic tiller. It was a system where goods were manufactured and surpluses were exported. If there was a need for something, it got "Made in the U.S.A.".
These were more balanced times and market corrections could be made while preserving the integrity of the system because the fundamentals were still extant. What we have now is a system that was deliberately spun out of control for the benefit of the few who controlled the money supply and the means of production. We saw the acceleration headlong in to the miasma of derivatives, credit default swaps, mortgage backed securities and all the rest of the lethal arsenal of the Financial Profiteers. Along with this departure from real money came the search for bigger profits at any cost. Why employ an American worker when you can get 20 exploited foreigners for the same price ? Looks good on a balance sheet and a P/E ratio. But, who makes their money in the stock market ? Not Mabel Jones in Boise, Idaho who's raising 6 children alone after her husband died of work related asbestos poisoning and all the family savings went on medical bills or Joe Kubek in Greensburg, Kansas, whose small farm could not compete with the Agribusiness giants or John Mulzer in Silicon Valley, California, who lost his high paying job in software development and got thrown out of his house with little or no chance of finding another job to get back on his feet. These are the people who need the help, the bailouts, the largesse and the support of their elected officials. If these are not the people who are the absolute number one on the list of priorities right now, then all the flags, the parades and the speeches have been for nothing.
Aided by the occupants of public office who came through the revolving door on Wall St., this rush to riches was instigated with ever increasing ferocity. Paul Volcker and Lawrence Summers both hail from the banking cartel of the Federal Reserve and the World bank. Summers , while working for the World Bank, quite liked the economic savings to be made by exporting toxic waste to third world countries because the population didn't live that long anyway. Volcker was instrumental in deregulating the markets and unleashing the curse of derivatives. Come to think of it, the latter was under the auspices of a Democratic president. Oh yes, these are exactly the guys that are needed to bring sanity back in the front door and kick out Mr Bad from the arena. Barack Obama is telling the American people that it is possible, with some monopoly money, to bring back the good times of credit laden consumption. One, he cannot possibly be serious and two, how long does he think he can continue to take money from other countries without having the means to ever pay it back. By surrounding himself with the omnipresent clique of liars and crooks he has singularly distinguished himself by reneging on his election promises before he's even sworn in. He knows perfectly well what would be required to reconstruct, (not "jump start") the U.S. economy, and Hell will freeze over long before he would ever say it.
It's been way too long since the U.S. brought forth a leader that actually talked sense to the electorate. It is way past time for the U.S to bring forth a leader who will be honest with the electorate; the truth needs to be spoken here. It's way past time for vacuous editorialising, empty promises, cronyism, kleptocracy, apathy, death by television, SUV's, mindless faith in Capitalism, the Free Market and the sincerity of politicians. Something has got to give and Barack Obama needs to level with his fellow citizens and guide them through the bleak future that awaits to collect it's dues.
Yesterday's handing over of yet more taxpayer money to CitiGroup has temporarily avoided a truly systemic breakdown of the world banking system but, as always, the real problems have not been addressed and the inevitable collapse has just been delayed.
Bloomberg reports today that "Citigroup will cover the first $29 Billion of pre-tax losses from the $306 Billion troubled assets pool, in addition to reserves it already set aside.Citigroup will accept 10% of losses above that amount with the Government (ie the taxpayer), responsible for 90%. The Treasury is absorbing $5 Billion in losses and the F.D.I.C. absorbing another $10 Billion. If the portfolio plummets, the Fed will come up with a loan for the remainder." Citigroup has already received $25 Billion under T.A.R.P..
CitiGroup has 185 million credit card accounts worldwide and even before the current stage of the Financial crisis, the increase in losses year on year had surged to 67% with a concurrent increase in accounts 90 days or more past due. Credit defaults are rising and it is inevitable that this major source of income will be reducing all the time. Nothing has occured to enable the credit card debtors to pay back what they owe or to stop the exponential charges which accumulate when payments are overdue. The longer they are overdue, the more difficult to pay the debt back. So we can assume that CitiGroup will be extremely vulnerable on this front and incur more losses.
The above does not include the ever present Pale Horseman of the derivatives world. U.S. Commercial banks alone account for $182.1 trillion in notional derivatives. The frightening thing about this is that only $8.2 trillion is regulated by an Exchange, the rest being over the counter and not subject to any regulation. Mid year 2008, Citibank N.A. held $37.1 Trillion in derivative bets with only 6.6% regulated by an exchange. That makes the derivatives exposure of Citi 5 times the exposure that Lehmans had when it went to the wall. The fallout from that one is still being felt by banks the world over. The danger of these derivatives rises as the economy worsens and who will pick up the bill when the inevitable debacle arrives ? The taxpayer, who should be getting something tangible for their hard earned tax dollars such as a real easing of their debt, a chance to keep their homes, investment in creating real jobs in production, not the publicly funded largesse to Paulson's cronies on Wall St. that they have been subject to so far.
The mal adroit policies of the Treasury continue to take precedent over common sense. This, despite the mea culpas by Paulson himself, admitting that his cunning plan was not improving the situation.Does anyone in Washington even think of the real economy anymore or do they mistakenly assume that they can just throw Fiat Money at Financial Institutions in the hope it will go away ? The ability of the U.S. to continue to throw this money down the drain still relies on the willingness of China, Japan and the Oil kingdoms and they will be seeing the yields on Treasuries slip down to the level where inflation will erode their gains. Gold is making a comeback in reserves as an inflation proof asset. These latter countries also have to deal with their own economic disasters and need to have real money to address the issues, not promises from a fundamentally bankrupt entity to pay them back the money. The growing distance between East and West ogres badly for the U.S.The coalescence of countries into regional blocks, with their associated pragmatism, is a sign of things to come. How the U.S. attacks it's real economic problems will be determined by the wisdom of some and the patience of others. Whichever way you look at it, the U.S. must drastically lower living standards and expectations commensurate with it's debt and existing production infrastructure to rebuild it's competitiveness. The exposure of the U.S. taxpayer to the toxicity of CitiGroup's "Assets" has only served to accelerate this downward trajectory.
Bloomberg reports today that "Citigroup will cover the first $29 Billion of pre-tax losses from the $306 Billion troubled assets pool, in addition to reserves it already set aside.Citigroup will accept 10% of losses above that amount with the Government (ie the taxpayer), responsible for 90%. The Treasury is absorbing $5 Billion in losses and the F.D.I.C. absorbing another $10 Billion. If the portfolio plummets, the Fed will come up with a loan for the remainder." Citigroup has already received $25 Billion under T.A.R.P..
CitiGroup has 185 million credit card accounts worldwide and even before the current stage of the Financial crisis, the increase in losses year on year had surged to 67% with a concurrent increase in accounts 90 days or more past due. Credit defaults are rising and it is inevitable that this major source of income will be reducing all the time. Nothing has occured to enable the credit card debtors to pay back what they owe or to stop the exponential charges which accumulate when payments are overdue. The longer they are overdue, the more difficult to pay the debt back. So we can assume that CitiGroup will be extremely vulnerable on this front and incur more losses.
The above does not include the ever present Pale Horseman of the derivatives world. U.S. Commercial banks alone account for $182.1 trillion in notional derivatives. The frightening thing about this is that only $8.2 trillion is regulated by an Exchange, the rest being over the counter and not subject to any regulation. Mid year 2008, Citibank N.A. held $37.1 Trillion in derivative bets with only 6.6% regulated by an exchange. That makes the derivatives exposure of Citi 5 times the exposure that Lehmans had when it went to the wall. The fallout from that one is still being felt by banks the world over. The danger of these derivatives rises as the economy worsens and who will pick up the bill when the inevitable debacle arrives ? The taxpayer, who should be getting something tangible for their hard earned tax dollars such as a real easing of their debt, a chance to keep their homes, investment in creating real jobs in production, not the publicly funded largesse to Paulson's cronies on Wall St. that they have been subject to so far.
The mal adroit policies of the Treasury continue to take precedent over common sense. This, despite the mea culpas by Paulson himself, admitting that his cunning plan was not improving the situation.Does anyone in Washington even think of the real economy anymore or do they mistakenly assume that they can just throw Fiat Money at Financial Institutions in the hope it will go away ? The ability of the U.S. to continue to throw this money down the drain still relies on the willingness of China, Japan and the Oil kingdoms and they will be seeing the yields on Treasuries slip down to the level where inflation will erode their gains. Gold is making a comeback in reserves as an inflation proof asset. These latter countries also have to deal with their own economic disasters and need to have real money to address the issues, not promises from a fundamentally bankrupt entity to pay them back the money. The growing distance between East and West ogres badly for the U.S.The coalescence of countries into regional blocks, with their associated pragmatism, is a sign of things to come. How the U.S. attacks it's real economic problems will be determined by the wisdom of some and the patience of others. Whichever way you look at it, the U.S. must drastically lower living standards and expectations commensurate with it's debt and existing production infrastructure to rebuild it's competitiveness. The exposure of the U.S. taxpayer to the toxicity of CitiGroup's "Assets" has only served to accelerate this downward trajectory.
So, 3 months since the arrival of the Storm which has redefined the modern world, what has happened and what can we expect ?
What we have seen and what we have received as the remedies to the problem have just been more of the same chicanery that led to the disaster in the first place. We still have the same players, the same crooks and the same "remedies".
Have you ever noticed that the more it changes, the more it remains the same ? Like the French phrase...plus ca change..
We have seen whole industries collapse because they did not take account of the real economy. We have seen the inflation of real estate bubbles, credit bubbles and others too numerous to mention. I remember talking to my mother 3 years ago about the property bubble in Ireland at the time. People were buying houses to beat the band and you were nobody unless you had a property or two. I remember saying to her that this has got to end when the price of property will be too expensive for people to afford and I was right. Property prices took a nosedive and the same people who bet on increased equity and a permanent gravy train were in the can. A roof over someone's head is a basic right in life and should never have been the subject of a speculative game. The moment arrived when a 2 Bedroom semi cost 500,000 Euros. This meant that, to buy the property, you needed two salaries. This meant in turn that a husband and wife had to be both working just to pay the mortgage. This resulted in a whole generation of children who were raised by nurseries and not by their parents. This, in itself, was a bad thing as children need their parents, not just for 20 minutes when they arrive home after traveling 60 miles to work and back and just about have time to tuck the kids in to bed before the manic performance begun again at 0500 the next morning. Is this a life ? No. This was one of the more saddening results of the property game.
The Treasury in America has led the world in the curative process to heal the wounded monster that they had created. The rest of the world has followed suit like lambs to the slaughter. YES, we will guarantee bank deposits, YES we will inject "liquidity" back in to the banks, YES we will regulate the financial markets more, YES, we will ask the IMF to supervise the transactions in derivatives and CDO's and be the Guardian of the Free Market. Who are these guys kidding ? Money does not come out of thin air nor does it grow on trees. Asking the IMF to be the guardian of our economic system goes beyond reasonable credence as it was the latter that sent out the "Economic hitmen" to impoverish and rob any lame duck in the globalised arena. Argentina and several African economies can attest to this.
We have seen in graphic detail just how useless and such a waste of taxpayer money was the TARP, along with the injection of capital in to Banks and financial institutions across the planet . The Banks just took the money and used it to acquire other companies and added the spare change to their ever decreasing balance sheets. Bank execs held multimillion seminars in tropical paradises to discuss the problems that they had created, they gave themselves huge bonuses for the hard work they had done in destroying the wealth of working people, they hoarded all the money for themselves, cranking up interest rates, reducing credit card spending limits to further debilitate the well being of their victims. They have stopped lending to industries because they know exactly what the future holds and want to cover their own behinds before lending any money that might actually boost production and create some jobs. This last point is important as the supply of credit for real production is essential in any truly productive economy. They were only too happy to finance consumption up to now, knowing full well that the moment would arrive when the goose could no longer lay any eggs. At this stage they can at least cook the goose.
Let's face it folks, there is no bailout for the ordinary Joe on the street, there is only free money for the same folks who brought us this disaster and the same folks who have had all politicians in their back pocket for generations. That's it. There is no argument on this. If you have one, I'd love to hear about it
We have had the spectre of "change" foisted upon us during the recent U.S. election, a glimmer of hope, a "change we can believe in" but , hold on a second, the new administration has surrounded itself with the same group of gangsters who engineered the crisis in the first place. the same people who brought us the repeal of the Glass Steagal Act, the same people who brought us the 1999 Gramm-Leach-Bliley Financial Services Modernization Act (FSMA). Details here. All of the preceding legislation designed to remove the restrictions on totally irresponsible financial grifts without any official oversight. These same people are now crafting the new economic policy that is supposed to rescue the economy. Simply put, who are they kidding ?
It seems inevitable that the situation is on a downward plunge towards the abyss and there is nothing that will be done to prevent it. This is policy, not happenstance. We have insiders like Colin Powell and Madeleine Albright and Bernard Kouchner, the French foreign minister warning that America is going to experience an event that will dwarf 9/11 in magnitude and Barack Obama will have to have the "Moral Character" to be able to make unpalatable decisions with regard to the American people. What are we talking about here ? Well, we have to look at what's already in place. Prison camps constructed by Halliburton throughout the U.S., the legal basis for imposing martial law, the continuity of Government plan still active, the return of some brigades of U.S. army soldiers assigned to "civil unrest" duties. Add the pieces up and you know what you see. You don't need a guide here. The powers that be know damn well what's on the horizon; they do not envisage an economic recovery and they only see an opportunity to realize an age old dream of unlimited power and an impoverished population with no choice but to go along or starve.
Alex Jones has always been on the ball with this. World government and the enslavement of the population. A few years ago, one looked at the evidence and thought that Alex was on to something good here, but recently, as I look at it, all the pieces are slotting in to place. We actually have world leaders talking of a "New World Order" right now in front of millions of viewers who are probably hearing the expression for the first time. This just goes to show how efficient the mainstream media has been in spinning information for the masses for the last so many years.
It has arrived at the stage where there is no possibility of real change without a commensurate fundamental change in basic thinking. We need to rid ourselves of the poison of mainstream TV "News", to rid ourselves of patronizing and intellectually insulting "editorials", to rid ourselves of the belief that elections can change the political landscape.
The sad part about this is that Governments realize that the Internet is the last bastion of Free speech, the last refuge of independent news and opinion. Australia has just announced that there will be no free access to the Internet anymore and it reserves the right to remove "political hate speech" from the provided content. Call it what it is; This is Fascism pure and simple . Other countries have been working on this as well, especially in the U.S, where "protecting the children" has been the rallying cry for control over Internet content. Have these people "protected the children" from poverty ? Have they "protected the children" from a seriously sub standard education ? Have they "Protected the children" from a future where they will have no hope of realizing a productive future, as the basis for the latter has been systematically destroyed ? Simple answer: NO.
Gerald Celente predicted today that there would be revolution in America and probably elsewhere as well. Is it any surprise ? How much can populations take ? How much do you have to take from a Man or Woman before they say "ENOUGH".
What we have seen and what we have received as the remedies to the problem have just been more of the same chicanery that led to the disaster in the first place. We still have the same players, the same crooks and the same "remedies".
Have you ever noticed that the more it changes, the more it remains the same ? Like the French phrase...plus ca change..
We have seen whole industries collapse because they did not take account of the real economy. We have seen the inflation of real estate bubbles, credit bubbles and others too numerous to mention. I remember talking to my mother 3 years ago about the property bubble in Ireland at the time. People were buying houses to beat the band and you were nobody unless you had a property or two. I remember saying to her that this has got to end when the price of property will be too expensive for people to afford and I was right. Property prices took a nosedive and the same people who bet on increased equity and a permanent gravy train were in the can. A roof over someone's head is a basic right in life and should never have been the subject of a speculative game. The moment arrived when a 2 Bedroom semi cost 500,000 Euros. This meant that, to buy the property, you needed two salaries. This meant in turn that a husband and wife had to be both working just to pay the mortgage. This resulted in a whole generation of children who were raised by nurseries and not by their parents. This, in itself, was a bad thing as children need their parents, not just for 20 minutes when they arrive home after traveling 60 miles to work and back and just about have time to tuck the kids in to bed before the manic performance begun again at 0500 the next morning. Is this a life ? No. This was one of the more saddening results of the property game.
The Treasury in America has led the world in the curative process to heal the wounded monster that they had created. The rest of the world has followed suit like lambs to the slaughter. YES, we will guarantee bank deposits, YES we will inject "liquidity" back in to the banks, YES we will regulate the financial markets more, YES, we will ask the IMF to supervise the transactions in derivatives and CDO's and be the Guardian of the Free Market. Who are these guys kidding ? Money does not come out of thin air nor does it grow on trees. Asking the IMF to be the guardian of our economic system goes beyond reasonable credence as it was the latter that sent out the "Economic hitmen" to impoverish and rob any lame duck in the globalised arena. Argentina and several African economies can attest to this.
We have seen in graphic detail just how useless and such a waste of taxpayer money was the TARP, along with the injection of capital in to Banks and financial institutions across the planet . The Banks just took the money and used it to acquire other companies and added the spare change to their ever decreasing balance sheets. Bank execs held multimillion seminars in tropical paradises to discuss the problems that they had created, they gave themselves huge bonuses for the hard work they had done in destroying the wealth of working people, they hoarded all the money for themselves, cranking up interest rates, reducing credit card spending limits to further debilitate the well being of their victims. They have stopped lending to industries because they know exactly what the future holds and want to cover their own behinds before lending any money that might actually boost production and create some jobs. This last point is important as the supply of credit for real production is essential in any truly productive economy. They were only too happy to finance consumption up to now, knowing full well that the moment would arrive when the goose could no longer lay any eggs. At this stage they can at least cook the goose.
Let's face it folks, there is no bailout for the ordinary Joe on the street, there is only free money for the same folks who brought us this disaster and the same folks who have had all politicians in their back pocket for generations. That's it. There is no argument on this. If you have one, I'd love to hear about it
We have had the spectre of "change" foisted upon us during the recent U.S. election, a glimmer of hope, a "change we can believe in" but , hold on a second, the new administration has surrounded itself with the same group of gangsters who engineered the crisis in the first place. the same people who brought us the repeal of the Glass Steagal Act, the same people who brought us the 1999 Gramm-Leach-Bliley Financial Services Modernization Act (FSMA). Details here. All of the preceding legislation designed to remove the restrictions on totally irresponsible financial grifts without any official oversight. These same people are now crafting the new economic policy that is supposed to rescue the economy. Simply put, who are they kidding ?
It seems inevitable that the situation is on a downward plunge towards the abyss and there is nothing that will be done to prevent it. This is policy, not happenstance. We have insiders like Colin Powell and Madeleine Albright and Bernard Kouchner, the French foreign minister warning that America is going to experience an event that will dwarf 9/11 in magnitude and Barack Obama will have to have the "Moral Character" to be able to make unpalatable decisions with regard to the American people. What are we talking about here ? Well, we have to look at what's already in place. Prison camps constructed by Halliburton throughout the U.S., the legal basis for imposing martial law, the continuity of Government plan still active, the return of some brigades of U.S. army soldiers assigned to "civil unrest" duties. Add the pieces up and you know what you see. You don't need a guide here. The powers that be know damn well what's on the horizon; they do not envisage an economic recovery and they only see an opportunity to realize an age old dream of unlimited power and an impoverished population with no choice but to go along or starve.
Alex Jones has always been on the ball with this. World government and the enslavement of the population. A few years ago, one looked at the evidence and thought that Alex was on to something good here, but recently, as I look at it, all the pieces are slotting in to place. We actually have world leaders talking of a "New World Order" right now in front of millions of viewers who are probably hearing the expression for the first time. This just goes to show how efficient the mainstream media has been in spinning information for the masses for the last so many years.
It has arrived at the stage where there is no possibility of real change without a commensurate fundamental change in basic thinking. We need to rid ourselves of the poison of mainstream TV "News", to rid ourselves of patronizing and intellectually insulting "editorials", to rid ourselves of the belief that elections can change the political landscape.
The sad part about this is that Governments realize that the Internet is the last bastion of Free speech, the last refuge of independent news and opinion. Australia has just announced that there will be no free access to the Internet anymore and it reserves the right to remove "political hate speech" from the provided content. Call it what it is; This is Fascism pure and simple . Other countries have been working on this as well, especially in the U.S, where "protecting the children" has been the rallying cry for control over Internet content. Have these people "protected the children" from poverty ? Have they "protected the children" from a seriously sub standard education ? Have they "Protected the children" from a future where they will have no hope of realizing a productive future, as the basis for the latter has been systematically destroyed ? Simple answer: NO.
Gerald Celente predicted today that there would be revolution in America and probably elsewhere as well. Is it any surprise ? How much can populations take ? How much do you have to take from a Man or Woman before they say "ENOUGH".
From Bloomberg today..
"U.S. Secretary Henry Paulson plans to use the second half of the $700 billion financial rescue program to help relieve pressures on consumer credit, scrapping an effort to buy devalued mortgage assets."Illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans and credit cards'' Paulson said today in a speech at the Treasury in Washington. `"This is creating a heavy burden on the American people and reducing the number of jobs in our economy.'""
So scrapping an effort to buy worthless toxic junk didn't turn out to be such a brilliant plan after all. Is Paulson the last to realise that this was always going to be the case ? Surely he must have known; enough people told him well in advance. He knew it all right and proceeded to hand the money over to his pals in Goldman Sachs and J.P. Morgan et al. This was always the plan.
However, Paulson, along with the administration, have finally realised that more and more people are seeing through the TARP snake oil and are looking for someone, yes anyone, to actually tackle the problems of the real economy. Or so we would hope.
"Illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans and credit card debt" snip and "is creating a heavy burden on the American people and reducing the number of jobs in the economy."
Hold the Front page already ! Paulson has just had his Eureka moment and realises that without the suckers there is no game. The "Heavy burden" on the American people and people from all over the planet has been placed there by Paulson, and his Wall St buddies ever since they figured out that money was not to be earned but to be invented out of thin air. Illiquidity in this sector was well established but he still handed out hard earned U.S. taxpayer cash for this worthless waste that was running down Wall St..
It's not just the "illiquidity" that is raising the cost and availability of car loans and credit card debt, it is the fact that unemployment is on the rampage along with the wholesale sinking of Industry and the real estate scam. The victims are seen queuing for a bowl of soup, sleeping under a bridge, fastening down the tent at night, pleading with Mortgage lenders to give them a break or just leaving the country,.
The members of the currently employed are hunkering down and getting ready for the worst. The last thing on their minds is a new car or another giant plasma TV. People are beginning to see the light at the end of a tunnel and it's not what they were expecting.
So those responsible for getting the Economy out of the mess are still trying to sell their victims even more debt. What about giving them back their money so they can keep their house ? What about reducing their tax burden so they can maybe start a small company ? What about TELLING lending institutions that he has given taxpayer money to, to cut their debtors a break ? Oh , I forgot about the Help program courtesy of Fannie Mae and Freddy Mac. These guys are so desperate to show the Chinese that they are actually doing something before the G20 summit, to save their own and the Chinese investors' behinds, that they have proposed to reduce monthly payments for people who are 90 days delinquent on their payments. This will only keep the lid on the mortgage backed securities market for a little longer. The reason most of these homeowners are delinquent on their house repayments is bacause they have either lost their job, have had their working hours reduced, have credit card debt spiral out of control as lenders increase the repayment interest or have been coping with the loss of equity on their property, upon which, they took out loans already. The equity is not going to increase, it will decrease. The date of foreclosure is just being delayed and the vultures will swoop in to fight over what's left. The problem cannot be fixed by reducing the mortgage repayments, the delinquency on which is only a symptom. Ignoring the fundamental causes of the problem will only exacerbate it. This has been the case ever since the first rumblings of the crisis and continues to be the modus operandum of the Financial Aristocracy.
In his remarks today, Paulson said that the Bush administration `"has taken the necessary steps to prevent a broad systemic event.'"
The irony is lost on poor Henry.
"U.S. Secretary Henry Paulson plans to use the second half of the $700 billion financial rescue program to help relieve pressures on consumer credit, scrapping an effort to buy devalued mortgage assets."Illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans and credit cards'' Paulson said today in a speech at the Treasury in Washington. `"This is creating a heavy burden on the American people and reducing the number of jobs in our economy.'""
So scrapping an effort to buy worthless toxic junk didn't turn out to be such a brilliant plan after all. Is Paulson the last to realise that this was always going to be the case ? Surely he must have known; enough people told him well in advance. He knew it all right and proceeded to hand the money over to his pals in Goldman Sachs and J.P. Morgan et al. This was always the plan.
However, Paulson, along with the administration, have finally realised that more and more people are seeing through the TARP snake oil and are looking for someone, yes anyone, to actually tackle the problems of the real economy. Or so we would hope.
"Illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans and credit card debt" snip and "is creating a heavy burden on the American people and reducing the number of jobs in the economy."
Hold the Front page already ! Paulson has just had his Eureka moment and realises that without the suckers there is no game. The "Heavy burden" on the American people and people from all over the planet has been placed there by Paulson, and his Wall St buddies ever since they figured out that money was not to be earned but to be invented out of thin air. Illiquidity in this sector was well established but he still handed out hard earned U.S. taxpayer cash for this worthless waste that was running down Wall St..
It's not just the "illiquidity" that is raising the cost and availability of car loans and credit card debt, it is the fact that unemployment is on the rampage along with the wholesale sinking of Industry and the real estate scam. The victims are seen queuing for a bowl of soup, sleeping under a bridge, fastening down the tent at night, pleading with Mortgage lenders to give them a break or just leaving the country,.
The members of the currently employed are hunkering down and getting ready for the worst. The last thing on their minds is a new car or another giant plasma TV. People are beginning to see the light at the end of a tunnel and it's not what they were expecting.
So those responsible for getting the Economy out of the mess are still trying to sell their victims even more debt. What about giving them back their money so they can keep their house ? What about reducing their tax burden so they can maybe start a small company ? What about TELLING lending institutions that he has given taxpayer money to, to cut their debtors a break ? Oh , I forgot about the Help program courtesy of Fannie Mae and Freddy Mac. These guys are so desperate to show the Chinese that they are actually doing something before the G20 summit, to save their own and the Chinese investors' behinds, that they have proposed to reduce monthly payments for people who are 90 days delinquent on their payments. This will only keep the lid on the mortgage backed securities market for a little longer. The reason most of these homeowners are delinquent on their house repayments is bacause they have either lost their job, have had their working hours reduced, have credit card debt spiral out of control as lenders increase the repayment interest or have been coping with the loss of equity on their property, upon which, they took out loans already. The equity is not going to increase, it will decrease. The date of foreclosure is just being delayed and the vultures will swoop in to fight over what's left. The problem cannot be fixed by reducing the mortgage repayments, the delinquency on which is only a symptom. Ignoring the fundamental causes of the problem will only exacerbate it. This has been the case ever since the first rumblings of the crisis and continues to be the modus operandum of the Financial Aristocracy.
In his remarks today, Paulson said that the Bush administration `"has taken the necessary steps to prevent a broad systemic event.'"
The irony is lost on poor Henry.
With the ever increasing amount of taxpayers' money handed over to "bail out" Financial Firms, manufacturing firms and Insurance firms, the Treasury has given a new meaning to the term "Venture Capital". Venture, by it's very definition, involves risk for reward. But risk and reward for whom ? All the risk for the U.S. taxpayer and all the reward for Company CEO's and boards. Has any of the money stuffed in to the back pockets of the Banking Community actually done any good ? For the economy no. For the U.S. taxpayer , (who is the real investor as it involves their money), none. For the recipients themselves ..yes. What have these institutions done with the free money ? JP Morgan Chase used some of it to buy Washington Mutual for $1.9 Billion and Bear Sterns $1.1 billion, Bank of America bought Merril Lynch for $50 Billion. Talking on return on investment...Fannie Mae, even after receiving $100 Billion, lost $29 Billion in the third quarter. A.I.G insurance after having received $85 billion, followed by and extra $38 Billion, lost $25 Billion in the third quarter. And now we are witnessing even more money being proposed for even more "Bail outs". As a side note, after each new merger, the number of controlling banks reduces and the choice for the consumer is slashed. Competition is slowly being removed from the banking sector and we are witnessing the birth of a Banking monopolization. It will come as no surprise that the cost of banking for the consumer will rise alongside.
Bailing out is only worth it if you can remove more water than is coming in, and with every "real economy" report that comes in, the waters rise even faster. General Motors is failing fast because it makes stuff nobody wants to buy. In free market terms that means that it goes to the wall. This is the system that the Fed have stood by for all those years as they put their trust in "Free Market Forces". Have they been blinded to the consequences of their actions and think that the solution to failing banks and manufacturers is to simply give them more money without even looking at their balance sheets. Would you trust Paulson or Bernancke to run your hedge fund ? I wouldn't think so. Let's take a look at exactly how much the bailouts come to so far..
Total: $2.7 Trillion
Not a single dime of the trillions of dollars thrown at the problem so far has led to an improvement in the system that it was meant to fix.
Quarterly losses are mounting, Banks, along with manufacturing, are dumping employees and slashing costs to "Weather out the financial crisis" , as if the same crisis can be cured simply by grabbing their employees' tax dollars and then firing them to reduce costs.
It's the people who are being fired who are the engine of the real economy. They're the ones who buy financial services, sign up to interest bearing mortgages, buy General Motors F 150 pickups and groceries down the local Target or Wall Mart. The Financial sector can do whatever it wants with the free money but none of it will benefit the people whom it was meant for originally.
The U.S. is shooting the final bolt at the problem. I say the Final Bolt because when they go to borrow the money from foreign governments and investors they will see that the well is fast drying up. For several trillions of dollars to be raised the amount of Treasuries that will have to be sold will bring the forces of the Free Market to bear. An overabundance of product brings a consequent reduction in price. Can anyone say "Bond Collapse" ? Every foreign investor currently holding the bonds already bought will find themselves with a serious hole in their collective pockets. Uncle Sam will have just maxed out his credit card. Is this the big talking point at the upcoming G20 summit ? Each and every party will have to come out of this meeting with something. Somehow, the foreign debt of the US will have to be accounted for. China and Japan will want to feel that their foreign reserves are actually worth something. The call for a "New World Order" is back in the headlines and heralds a ground shift in how the world will be run. There is no alternative as the old system has gotten to the point that it can no longer survive. The engine that kept the American Dream alive and pushed the growth of China is now gone as the there are no more Golden eggs to be laid. That Duck was shot a while ago by Alan Greenspan and successive Fed chairmen. Keeping an eye on the 10 Year Treasury yield these days has become a nail biting nightmare.
So with the "Bailing out" of moribund institutions, all that has been achieved here is the certainty that things will get steadily worse. Nothing that has been done so far has reduced unemployment, increased tax revenue, increased the value of real estate or stopped the Soup Kitchen queues getting longer. It has all been for nothing, well except for the Royal Bank of Scotland execs who threw themselves a $300,000 champagne party, no doubt to celebrate their collective genius at managing other people's money.
So why throw even more money at the problem when it obviously is not solving the problem ? In the case of General Motors, the loss in unemployment terms could come to 2.5 million. Gone would be the health care that the company provides it's current and former employees. This would seem like a worthy candidate as the fallout is so great that this company is just "too big to fail". But the system has already failed and the inevitability of more company failures is guaranteed...there is no getting away from this unless the system is turned on it's head. The Real Economy has to drive the Means of Production and not the other way round. There is no point in General Motor's burning through all their savings for another year using more tax payers money if , by the end of that year, there is nobody left to buy their products. This simply amounts to an unbelievably gross waste of money. There is no return on this investment and the only upside is that some of the employees will get to keep their jobs and healthcare a little longer.Thousands of jobs will be lost via mergers and cost cutting schemes anyway.
The only realistic way to save General Motors is to invest in what General Motors actually earns money doing; Selling automobiles. This is not achieved by handing them cash, it is achieved in investing in their customers, who at present, are a fast diminishing commodity. The latter is the indespensable component of the system, not the other way round.There are a lot of other Auto companies out there that offer much better products at a lower price and if GM is not up to the mark it's history anway.
If the $2.7 trillion dollars had been invested in rebuilding America's Economy, i.e. creating jobs for the unemployed, reducing capital gains tax, and thus stimulating real economic growth, repairing infrastructure, renovating derelict factories, keeping people in their homes, keeping them mobile and maintain a disposable income, reducing their tax payments, then the return on the investment would have been greater. A new fair banking system, to replace the current racket that has caused wholesale destruction, could have been organised along the lines of Credit Unions where the customers actually own a part of the institution. This would have heralded a step in the right direction to recovery by basing the economy on real value, not CDO's, MBS's and Derivatives, which is just a way of lighing a fire downwind of you and hoping the wind doesn't change. By doing precisely the opposite, the available capital has been squandered and ended up in the pockets of the same people who are responsible for the mess in the first place. Oh and by the way, American Express has just decided to become a bank and feed at the taxpayer trough. Come on down, the water's just fine. One time only Cash Giveaway ! Get it while we still get to keep it !
It's time to stop the deliberate waste of public money and hold our "Benefactors" to account. The "useless eaters" (Henry Kissinger) are watching their hedge fund being managed by the largest coalition of organised crime in human history.
Bailing out is only worth it if you can remove more water than is coming in, and with every "real economy" report that comes in, the waters rise even faster. General Motors is failing fast because it makes stuff nobody wants to buy. In free market terms that means that it goes to the wall. This is the system that the Fed have stood by for all those years as they put their trust in "Free Market Forces". Have they been blinded to the consequences of their actions and think that the solution to failing banks and manufacturers is to simply give them more money without even looking at their balance sheets. Would you trust Paulson or Bernancke to run your hedge fund ? I wouldn't think so. Let's take a look at exactly how much the bailouts come to so far..
| TARP | $700 billion |
| Bear Stearns | $29 billion |
| Detroit Big Three | $25 billion |
| AIG | $150 billion |
| Fannie and Freddie | $200 billion |
| Mortgage-backed secs. | $144 billion |
| FHA Rescue bill | $300 billion |
| JPM for Lehman | $87 billion |
| Fed’s TAF program | $200 billion |
| Commercial paper | $50 billion |
| Fed currency swaps | $740 billion |
Total: $2.7 Trillion
Not a single dime of the trillions of dollars thrown at the problem so far has led to an improvement in the system that it was meant to fix.
Quarterly losses are mounting, Banks, along with manufacturing, are dumping employees and slashing costs to "Weather out the financial crisis" , as if the same crisis can be cured simply by grabbing their employees' tax dollars and then firing them to reduce costs.
It's the people who are being fired who are the engine of the real economy. They're the ones who buy financial services, sign up to interest bearing mortgages, buy General Motors F 150 pickups and groceries down the local Target or Wall Mart. The Financial sector can do whatever it wants with the free money but none of it will benefit the people whom it was meant for originally.
The U.S. is shooting the final bolt at the problem. I say the Final Bolt because when they go to borrow the money from foreign governments and investors they will see that the well is fast drying up. For several trillions of dollars to be raised the amount of Treasuries that will have to be sold will bring the forces of the Free Market to bear. An overabundance of product brings a consequent reduction in price. Can anyone say "Bond Collapse" ? Every foreign investor currently holding the bonds already bought will find themselves with a serious hole in their collective pockets. Uncle Sam will have just maxed out his credit card. Is this the big talking point at the upcoming G20 summit ? Each and every party will have to come out of this meeting with something. Somehow, the foreign debt of the US will have to be accounted for. China and Japan will want to feel that their foreign reserves are actually worth something. The call for a "New World Order" is back in the headlines and heralds a ground shift in how the world will be run. There is no alternative as the old system has gotten to the point that it can no longer survive. The engine that kept the American Dream alive and pushed the growth of China is now gone as the there are no more Golden eggs to be laid. That Duck was shot a while ago by Alan Greenspan and successive Fed chairmen. Keeping an eye on the 10 Year Treasury yield these days has become a nail biting nightmare.
So with the "Bailing out" of moribund institutions, all that has been achieved here is the certainty that things will get steadily worse. Nothing that has been done so far has reduced unemployment, increased tax revenue, increased the value of real estate or stopped the Soup Kitchen queues getting longer. It has all been for nothing, well except for the Royal Bank of Scotland execs who threw themselves a $300,000 champagne party, no doubt to celebrate their collective genius at managing other people's money.
So why throw even more money at the problem when it obviously is not solving the problem ? In the case of General Motors, the loss in unemployment terms could come to 2.5 million. Gone would be the health care that the company provides it's current and former employees. This would seem like a worthy candidate as the fallout is so great that this company is just "too big to fail". But the system has already failed and the inevitability of more company failures is guaranteed...there is no getting away from this unless the system is turned on it's head. The Real Economy has to drive the Means of Production and not the other way round. There is no point in General Motor's burning through all their savings for another year using more tax payers money if , by the end of that year, there is nobody left to buy their products. This simply amounts to an unbelievably gross waste of money. There is no return on this investment and the only upside is that some of the employees will get to keep their jobs and healthcare a little longer.Thousands of jobs will be lost via mergers and cost cutting schemes anyway.
The only realistic way to save General Motors is to invest in what General Motors actually earns money doing; Selling automobiles. This is not achieved by handing them cash, it is achieved in investing in their customers, who at present, are a fast diminishing commodity. The latter is the indespensable component of the system, not the other way round.There are a lot of other Auto companies out there that offer much better products at a lower price and if GM is not up to the mark it's history anway.
If the $2.7 trillion dollars had been invested in rebuilding America's Economy, i.e. creating jobs for the unemployed, reducing capital gains tax, and thus stimulating real economic growth, repairing infrastructure, renovating derelict factories, keeping people in their homes, keeping them mobile and maintain a disposable income, reducing their tax payments, then the return on the investment would have been greater. A new fair banking system, to replace the current racket that has caused wholesale destruction, could have been organised along the lines of Credit Unions where the customers actually own a part of the institution. This would have heralded a step in the right direction to recovery by basing the economy on real value, not CDO's, MBS's and Derivatives, which is just a way of lighing a fire downwind of you and hoping the wind doesn't change. By doing precisely the opposite, the available capital has been squandered and ended up in the pockets of the same people who are responsible for the mess in the first place. Oh and by the way, American Express has just decided to become a bank and feed at the taxpayer trough. Come on down, the water's just fine. One time only Cash Giveaway ! Get it while we still get to keep it !
It's time to stop the deliberate waste of public money and hold our "Benefactors" to account. The "useless eaters" (Henry Kissinger) are watching their hedge fund being managed by the largest coalition of organised crime in human history.
Today heralded the long awaited release of figures compiled by the Depository Trust & Clearing Corporation .The latter is controlled by Banks amongst which are JP Morgan and Goldman Sachs.
From their Article.. "Reported estimates of the size of the credit default swap market have so far been based on surveys. These surveys tend to overstate the size of the market due to each party to a trade separately reporting its own side. Thus, when two parties to a single $10 million dollar trade each report their “side” of the trade, the amount reported is $20 million, which overstates the actual size by a factor of two since both reports relate to a single $10 million contract. When examining the outstanding amount of actual contracts registered in the Warehouse (not separately reported “sides”) as of October 9, 2008, credit default swap contracts registered in the Warehouse totaled approximately $34.8 trillion (in US Dollar equivalents). This is down significantly from the approximately $44 trillion that were registered in the Warehouse at the end of April this year."
Well some good news at least it's not the widely reported $54 Trillion, it's just $34.8 Trillion. Now..
"Less than 1% of credit default swap contracts currently registered in the Warehouse relate to particular residential mortgage-backed securities. Mortgage-related index products also have some components relating to residential mortgages and, as a whole, also constitute a relatively small fraction of total credit default swaps registered in the Warehouse."
Well the Mortgage market is in Freefall so we can probably expect 1% of $34.8 Trillion ie $348 Billion at very high risk. So what accounts for the remaining $34,452,000,000 ? We have to assume it's a Mix of ..
Foreign Exchange Contracts
Forwards and Forex Swaps
Currency Swaps
Options
Interest rate Contracts
Forward rate Agreements
Interest Rate Swaps
Options
Equity-linked contracts
Forwards and swaps
Options
Commodity contracts
Gold
Other Commodities
Forwards and Swaps
Options
Credit default swaps
Single name instruments
Multi name Instruments
Unallocated ?
The exposure to destruction by CDS's was never just about exposure to Mortgages. Looking at the list above, it is plain to see that the possible vulnerable flanks are many. The DTCC summary press release neglects to address this. With companies reporting ever increasing losses, unemployment growing at an unforeseen rate and thousands of Funds going broke after trillions were lopped off the top of the Global Stock Market, the collapse can only increase. It is not contained.
There is no mention of the Credit Default Swaps done on the Financial health of entire countries, never mind Giant corporations like General Motors. The writing is on the wall for a huge proportion of the base assets involved and the associated default risk will be increasing alongside them. It's no surprise that the DTCC does not want to explore beyond the Mortgage angle. Everyone knows about the Mortgage crisis, but this was only the precipitating event - itself precipitated by a very ill basic economic base - that knocked over the first domino. The rest have already begun to fall and we see the tide coming in closer every day. This is no time for obfuscation and patronising; we need to know the Real Facts not..
"The idea that the industry lacks a central registry for over-the-counter (OTC) credit default swaps (CDS) is grossly misleading and has resulted in inaccurate speculation on a number of matters, including the overall size of the market, its role in the mortgage crisis, and the size of potential payment obligations under credit default swaps relating to Lehman Brothers. The extent to which such speculation has fueled last week’s market turmoil is difficult to determine."
I think the Market was in turmoil, not because of paranoid speculation, but in reaction to an ever worsening economic outlook, which shows absolutely no sign of getting better anytime soon.
From their Article.. "Reported estimates of the size of the credit default swap market have so far been based on surveys. These surveys tend to overstate the size of the market due to each party to a trade separately reporting its own side. Thus, when two parties to a single $10 million dollar trade each report their “side” of the trade, the amount reported is $20 million, which overstates the actual size by a factor of two since both reports relate to a single $10 million contract. When examining the outstanding amount of actual contracts registered in the Warehouse (not separately reported “sides”) as of October 9, 2008, credit default swap contracts registered in the Warehouse totaled approximately $34.8 trillion (in US Dollar equivalents). This is down significantly from the approximately $44 trillion that were registered in the Warehouse at the end of April this year."
Well some good news at least it's not the widely reported $54 Trillion, it's just $34.8 Trillion. Now..
"Less than 1% of credit default swap contracts currently registered in the Warehouse relate to particular residential mortgage-backed securities. Mortgage-related index products also have some components relating to residential mortgages and, as a whole, also constitute a relatively small fraction of total credit default swaps registered in the Warehouse."
Well the Mortgage market is in Freefall so we can probably expect 1% of $34.8 Trillion ie $348 Billion at very high risk. So what accounts for the remaining $34,452,000,000 ? We have to assume it's a Mix of ..
Foreign Exchange Contracts
Forwards and Forex Swaps
Currency Swaps
Options
Interest rate Contracts
Forward rate Agreements
Interest Rate Swaps
Options
Equity-linked contracts
Forwards and swaps
Options
Commodity contracts
Gold
Other Commodities
Forwards and Swaps
Options
Credit default swaps
Single name instruments
Multi name Instruments
Unallocated ?
The exposure to destruction by CDS's was never just about exposure to Mortgages. Looking at the list above, it is plain to see that the possible vulnerable flanks are many. The DTCC summary press release neglects to address this. With companies reporting ever increasing losses, unemployment growing at an unforeseen rate and thousands of Funds going broke after trillions were lopped off the top of the Global Stock Market, the collapse can only increase. It is not contained.
There is no mention of the Credit Default Swaps done on the Financial health of entire countries, never mind Giant corporations like General Motors. The writing is on the wall for a huge proportion of the base assets involved and the associated default risk will be increasing alongside them. It's no surprise that the DTCC does not want to explore beyond the Mortgage angle. Everyone knows about the Mortgage crisis, but this was only the precipitating event - itself precipitated by a very ill basic economic base - that knocked over the first domino. The rest have already begun to fall and we see the tide coming in closer every day. This is no time for obfuscation and patronising; we need to know the Real Facts not..
"The idea that the industry lacks a central registry for over-the-counter (OTC) credit default swaps (CDS) is grossly misleading and has resulted in inaccurate speculation on a number of matters, including the overall size of the market, its role in the mortgage crisis, and the size of potential payment obligations under credit default swaps relating to Lehman Brothers. The extent to which such speculation has fueled last week’s market turmoil is difficult to determine."
I think the Market was in turmoil, not because of paranoid speculation, but in reaction to an ever worsening economic outlook, which shows absolutely no sign of getting better anytime soon.
"A GM default would be absolutely huge," said Jonathan Loredo, of credit manager Cairn Capital. "It would be the biggest thing to hit the market in terms of losses and operational stress." That was in March 2006. "Overall, General Motors sold 168,719 vehicles in October, down from 307,408 in the same month last year, while Ford, including its Volvo brand, sold 132,278 light vehicles last month down from 189,515 in the corresponding month last year.Mike DiGiovanni, GM's executive director of global market and industry analysis, called the situation "frightening" and "dire"." That was yesterday from Forbes. Has the Treasury just decided to defer a politically unpalatable decision until after the election or are they throwing in the towel ? If GM is allowed to go bankrupt the derivative nightmare will unravel in full daylight and bring down any institution that is not anchored with solid gold. It has been obvious from the start that the bailouts and financial "Stimulus" packages have been delivered for one purpose and one purpose only: Helping the Banking community to triage the self inflicted wound of overleveraged speculation. Theoretically the amount that GM are looking for to retool their plants, moribund as they are, is small change to what has been doled out so far. But, as discussed in This Article , even if they were to retool and start producing more fuel efficient vehicles, who is going to buy them ? Instead of putting the cash in to GM, the Treasury would prefer to invest it in Fuel Efficient Vehicle research, the fruits of which would be available to all US Auto companies, if any are still standing. But it still comes down to the simple arithmetic that is consistently ignored in mainstream discourse; If the population is broke, jobless and Homeless there is no point in wasting money putting products behind showroom glass while the intended consumers can only press their noses against it and dream. Even if they are leaving the crying baby for Obama to deal with in January, (and he has said that he is in favour of helping GM financially), the situation will be gravely worse by then anyway and GM will probably be way down the list as he finds himself with a situation that even FDR could not begin to comprehend.
From AFP.. "PARIS (AFP) — Societe Generale bank on Monday reported an 83-percent collapse in third-quarter profits on provisions and write-downs but its shares gained 2.0 percent.
The bank, hit by a huge unauthorised trading scandal at the beginning of the year, said the provisions and write-downs had arisen mainly in its financing and investment divisions." I recall the massive news coverage on the sacrificial lamb that had been chosen by the Bank. This was early 2008. I was very suspicious about this story as it would provide a preemptive cover for derivative and cds losses they had to see coming. I wonder if the list below had anything to do with it ?
| Q2 2008 (€ m) | 2007 (€ m) | |
|---|---|---|
| Société Générale | 473,329 | 487,959 |
| Credit Agricole | 383,995 | 364,178 |
| BNP Paribas | NA | 597,578 |
| Natixis | NA | 202,928 |
| Barclays | 460,423 | 352,133 |
| Deutsche Bank | 1,138,090 | 1,193,131 |
| Credit Suisse | 277,362 | 331,807 |
| UBS | 652,972 | 757,271 |
| * European banks - outstanding trading positions with Lehman Source: JPMorgan estimates, Company data | ||
It was during the Third Quarter that they would have got out their Cheque Books after the Lehman's auction.
Today, Reuters reports that "Asian stocks were set for a record rise and a third straight day of gains on Thursday as lower borrowing costs and international efforts to provide liquidity to emerging markets coaxed investors from safe havens like the yen."
Asia stocks surge 10 percent after rate cuts
Investors, as a direct result of lower interest rates which reduce the cost of borrowing money, are now quite happy to balance the scales of Risk and investment cost. "Safe havens" are now seen as too safe and not able to generate the giant profits that they are running after. But in their quest for profit, they are about to restart the game which blew up in their faces quite recently. This signals an alarming return to insanity in the stock markets and increases the chances of a complete market meltdown. So what if the Interest rate is cut ? It will not bring any improvement to the real economy as we have seen over the last few months, indeed everything has got steadily worse. Unemployment, foreclosures, reduced consumer spending, falling corporate profits continue to rise unimpeded.
"Markets in Japan, Hong Kong and South Korea rocketed 10-12 percent higher, dragging along commodity prices in the wake of the Federal Reserve's cut in rates to the lowest since June 2004, aimed at softening the blow of a potentially deep U.S. recession."
So by softening the blow, what are we talking about here ? If commodity prices go up as the stock market, who is this good for exactly ? Corporate profit, maybe, but with reduced sales this is wiped out and the net results for practically every industry, except Big Oil and the Arms industry of course, get grimmer and grimmer on each passing day. Rocketing commodity prices certainly do not help the consumer, who IS the real economy; a fact that the Twilight Zoners in Finance seem to have completely missed.
"The avalanche of government measures taken to increase bank liquidity, including $120 billion of currency swap lines opened between the Fed and four developing economies, and global rate cuts have prompted investors to make room in their cash-heavy portfolios for riskier assets. Credit availability and risk taking are essential to the functioning of the financial system."
This illustrates very concisely the madness that passes for Economics these days. If Economics is defined as "the science that deals with the production, distribution, and consumption of goods and services, or the material welfare of humankind", then what these guys are talking about has nothing to do with "Economics". They are running a scam known as.. "Speculation : An engagement in business transactions involving considerable risk but offering the chance of large gains, esp. trading in commodities, stocks, etc., in the hope of profit from changes in the market price." Is this the kind of policy we want to encourage when we are in A Financial Meltdown in the real economy. If the purpose of all those bailouts with taxpayers' money, the interest rate cuts to "stimulate" the economy, then we are all truly in for an extremely painful reality check.
"Despite the welcome responses to policy actions, risk from slower global growth has not been extinguished and still points to potential underperformance for much of Asia," Patrick Bennett, Asia foreign exchange and rates strategist with Societe Generale in Hong Kong.
So the insane response from the Stock Market is actually welcome. No worries then; we have been assured by an Investment banker. Doh ! Aren't these the guys, along with accomodating Governments, who got us all in to this mess? What "Risk" of slower global growth and underperformance is this guy talking about ? Man, that's old news at this stage, it's laready happened and continues to get worse by the day. Does the Real Economy even figure in to this guy's equations ? I think it's beginning to dawn on everyone that the people that have received the Taxpayers' money have really only one purpose in mind and that is to use the money partly to cover their own big mistakes but also to feed the Gamblers Anonymous that make up their ranks. This, indeed, spells doom for the rest of us.
Asia stocks surge 10 percent after rate cuts
Investors, as a direct result of lower interest rates which reduce the cost of borrowing money, are now quite happy to balance the scales of Risk and investment cost. "Safe havens" are now seen as too safe and not able to generate the giant profits that they are running after. But in their quest for profit, they are about to restart the game which blew up in their faces quite recently. This signals an alarming return to insanity in the stock markets and increases the chances of a complete market meltdown. So what if the Interest rate is cut ? It will not bring any improvement to the real economy as we have seen over the last few months, indeed everything has got steadily worse. Unemployment, foreclosures, reduced consumer spending, falling corporate profits continue to rise unimpeded.
"Markets in Japan, Hong Kong and South Korea rocketed 10-12 percent higher, dragging along commodity prices in the wake of the Federal Reserve's cut in rates to the lowest since June 2004, aimed at softening the blow of a potentially deep U.S. recession."
So by softening the blow, what are we talking about here ? If commodity prices go up as the stock market, who is this good for exactly ? Corporate profit, maybe, but with reduced sales this is wiped out and the net results for practically every industry, except Big Oil and the Arms industry of course, get grimmer and grimmer on each passing day. Rocketing commodity prices certainly do not help the consumer, who IS the real economy; a fact that the Twilight Zoners in Finance seem to have completely missed.
"The avalanche of government measures taken to increase bank liquidity, including $120 billion of currency swap lines opened between the Fed and four developing economies, and global rate cuts have prompted investors to make room in their cash-heavy portfolios for riskier assets. Credit availability and risk taking are essential to the functioning of the financial system."
This illustrates very concisely the madness that passes for Economics these days. If Economics is defined as "the science that deals with the production, distribution, and consumption of goods and services, or the material welfare of humankind", then what these guys are talking about has nothing to do with "Economics". They are running a scam known as.. "Speculation : An engagement in business transactions involving considerable risk but offering the chance of large gains, esp. trading in commodities, stocks, etc., in the hope of profit from changes in the market price." Is this the kind of policy we want to encourage when we are in A Financial Meltdown in the real economy. If the purpose of all those bailouts with taxpayers' money, the interest rate cuts to "stimulate" the economy, then we are all truly in for an extremely painful reality check.
"Despite the welcome responses to policy actions, risk from slower global growth has not been extinguished and still points to potential underperformance for much of Asia," Patrick Bennett, Asia foreign exchange and rates strategist with Societe Generale in Hong Kong.
So the insane response from the Stock Market is actually welcome. No worries then; we have been assured by an Investment banker. Doh ! Aren't these the guys, along with accomodating Governments, who got us all in to this mess? What "Risk" of slower global growth and underperformance is this guy talking about ? Man, that's old news at this stage, it's laready happened and continues to get worse by the day. Does the Real Economy even figure in to this guy's equations ? I think it's beginning to dawn on everyone that the people that have received the Taxpayers' money have really only one purpose in mind and that is to use the money partly to cover their own big mistakes but also to feed the Gamblers Anonymous that make up their ranks. This, indeed, spells doom for the rest of us.
Today, Los Angeles Police Chief William Bratton has instructed his forces to be on high alert during the US elections.
Private security firms (Blackwater ?) have also been engaged for these activities. The argument behind the move is the threat of Islamic fundamentalists attacking US infrastructure to influence the outcome of the election. In his own words he has stated that a Win for Mc Cain would be the preferred result for Osama Bin laden because Obama would better the image the rest of the world has of the United States.The image of "The Great Satan" is the most valuable asset for the Islamic radicals. The fact that Osama Bin Laden is DEAD doesn't seem to register on the Irony scale.
Ok
Now let's see what is really going on here. The general wish of the US population at the moment would indicate that Obama is the popular candidate. This is comforting because if the US population actually preferred Mc Cain over Obama, then God Help us all. Neither will bring any meaningful change when they arrive in Pennsylvania Avenue anyway but it's the illusion that counts here. This is what the electorate are voting on, well besides those folks like the Rascists, the Loony Christian Right, The Soccer moms who like Sarah's lipstick, or the Beer Guzzling Baseball watching couch potatoes that think she has a nice ass.Not that I have anything against Baseball or Beer, but there will always be people who vote based on a serious lack of understanding of even the most basic, if deceptive, garbage coming from the mouths of the candidates. But, hey, that's "Democracy" for you.
Neither will be able to prevent the accelerating Financial destruction of the population. The Rich are already in the lifeboats and the rest of us are still drinking soda at the bar or looking frantically around for a lifejacket. So why the state of high alert as, happened in 2006 and 2004? Could it be because the election is being rigged, and all the evidence is in to support this, and the population realises that they have been had - Again - and will take to the streets like they did in Los Angeles during the Race riots ? Possibly. Most people will be analysing the results and being spoon fed by the Newspeak Corporation telling their viewers that, Golly gee, the winner won in a fair fight and God Bless Democracy;. the American people have spoken.
Fortunately there are people who have come to realise that they have been the victims of the biggest grift in Human History courtesy of Government, Democrat or Republican, no difference. What will they do if Mc Cain wins ? Protest on the street ? We have seen a graphic demonstration in the last few years of exactly what that leads to. Tear Gas, Tasers, Horse charges, Wanton Assault and Battery by the Men In Black, Free speech "Zones", beating up the old and infirm, the very young and the vulnerable ans summary imprisonment.
The power of the people has been steadily eroded financially, morally and constitutionally. there's not much left to take away at this stage but, have no doubt, they want it all and then some. thinking back to all those Halliburton contracted Detention Camps that have been built all across America, you wonder exactly who they are intended for. Certainly not for "Islamic terrorists", they're busy defending their homeland in Afghanistan and Iraq against a murderous assault on their sovereignty by NATO, spear headed by the Moron in Chief's personal muscle. So that leaves the American people themselves. No way I hear you say ! Listen up, as discussed in this blog, a thousand others and online on the Goverment's own website, "President" George W Bush has the legal power to declare martial law at the drop of a hat. That's the facts and there is no denying them. When have Power crazy gangsters, like the aforementioned, made laws that give them Dictatorial power and then just not use them ? Errrr NEVER. This horribly beautiful orchestration of Legal Sleight of Hand has left US citizens completely legally powerless to resist any whim of the Emperor in Chief. Do not think for a second that you have any rights in this matter. Ever heard of Guantanamo ? Well, you, an American cizizen, can be declared an enemy combatant, and shipped over there never to be heard of again. Jose padilla was the test case to disfigure the law of habeus corpus and was acquiesced to by a very accomodating Attorney General and Congress. In fact, most of Bush's power grabs have been achieved by signing statements and executive orders, as did Bill Clinton before him. Congress didn't even get a say. But even when they did, they went along anyway. Patriot Act, Patriot Act 2 etc etc. Another thing to remember here is that the 3rd Infantry’s 1st BCT is now on American soil with a stated mission in "Civilian Unrest" Adios Posse Comitatus.
Rep Brad Sherman spills the Beans
So Police Chief William Bratton, various nationwide police chiefs, National Guard Commanders, Commanding officer of the 3rd Infantry’s 1st BCT.What do you have planned for your fellow citizens to whom you swore a solemn oath to protect from enemies, foreign and Domestic ?
No doubt, we are about to find out.
In an endeavour to provide you with information that I have been using for research and daily updates, I have put a list of RSS feeds that you may find useful. Just a note, I am not recommending anything that these feeds provide as an endorsement. I provide them just for your own evaluation and information. Good researching folks.
Money Morning...I like these guys for info, investing advice and analysis.
http://feeds.feedburner.com/USMoneyMorn
Yahoo Business News
http://rss.news.yahoo.com/rss/personalf
Money and Markets
http://www.moneyandmarkets.com/topic/is
Google Business News
http://news.google.fr/nwshp?tab=wn&n
Seeking Alpha..one of my favourites
http://seekingalpha.com/page/feeds?sour
Money Morning...I like these guys for info, investing advice and analysis.
http://feeds.feedburner.com/USMoneyMorn
Yahoo Business News
http://rss.news.yahoo.com/rss/personalf
Money and Markets
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Today, Honda and Nissan in Japan have announced reduced earnings forecasts and lack of demand in Europe and the US for their products. Honda lowered its global car sales forecast for this year by 65,000 units to 4.015 million units, while Toyota is also reporting a severe contraction to Europe, India, and the US. Meanwhile in the US General Motors Corp, Chrysler LLC and Ford Motor Co are struggling to stay alive and are burning up their cash reserves at breakneck speed as they try and retool to manufacture more fuel efficient vehicles. They are in for $30 Billion of taxpayer money to help them along with this. However, one problem remains. The US Consumer is strapped for cash and acces to credit to buy a new car is almost gone. It is cheaper to keep what you already have and repair it if necessary. This works out to be the only way that the US can stay mobile. Extremely few consumers buy new cars for cash. The glut in SUV's was financed by easy credit and not by people who dipped in to their savings to treat themselves. Even if a Toyota Yaris gives twice the mileage compared to a Chrysler or a Ford, who has the money to swap cars ? It's impossible to sell seconhand gas guzzlers so that avenue of finance is closed. It is impossible to get a loan so that avenue is closed as well. So maybe you buy a second hand Honda down at the local car lot. Is this going to boost new car sales ? Nope. So even if GM / Chrysler / Cerberus Capital survive until they have retooled their shiny new factory, will what comes off the production line go straight to the US Consumer ? Nope. . So here we have another good example of throwing good money after bad to prop up industry without propping up the very thing it depends on..The Consumer. One last thing to note. The amount of derivatives connected to GM are astronomical ; that's why there is such an effort to keep it alive on the Oxygen machine to delay the impact it will have on all the counterparties involved. $4.72 trillion owed by Bankrupt countries in the emerging / moribund markets to the rest of Europe; This will be small change when GM unwinds.
Today in the Wall St Journal, the pundits outdid themselves in gushing out the "Good News"
http://online.wsj.com/article/SB1225069
The falling UK Sterling against the dollar is , apparently , Good News. Well, the Economic Geniuses at the the WSJ are now saying that the falling UK currency will boost foreign tourism and make agricultural exports from Britian very attractive to foreigners. It could, in their own words..
"boost exports of U.K. goods and rebalance the economy away from consumer spending, as policy makers have long sought to do."
Well, that's alright then. Go back to sleep, all is well in the UK.
But there is a reason that UK consumer spending is way down, People are broke or soon about to be. Unemployment is soaring and businesses are collapsing everyday. So the shift away from consumer spending is a slam dunk. But exports depend on production. UK Banks are not lending to anybody and won't be either. So farmers have had to cut the crop production as they cannot secure financing for larger crops for export and are currently at risk of being barely able to accomodate Domestic demand, as are farmers in the U.S.. They are in as much of a bind as everyone else; so much for increased exports.
As for foreign tourism, well we would be talking obviosly about American tourists with massive amounts of the greenback in their back pockets ready to spend it all in the land of Tea and Scones. But aren't Americans in a bind at the moment with vastly decreased consumer spending even on basic household items and food, never mind that Holiday in the Rain.
It's rubbish like this in the Mainstream Media that deflect readers away from the reality of what is actually happening. It's amazing the amount of people that one meets that are still under an illusion about what is actually in progress here. One glance at the Dow , just to make sure that is has not totally tanked is enough for everyone to go back to sleep. A strong dollar against the Euro is a signal that all is just dandy with the United States Economy. Move on, nothing happening here has been the order of the day. Why ? If the vast majority of the population were truly to realise exactly what the depth and gravity of this crisis amounts to, there would be lynchings on the streets, as George Bush Sr once alluded to, ( He actually said that "If the American people were to realise what we have done, they would chase us down the street and lynch us"), and a wholesale revolution to get rid of the criminals and their accomplices that got us all in to this mess.
http://online.wsj.com/article/SB1225069
The falling UK Sterling against the dollar is , apparently , Good News. Well, the Economic Geniuses at the the WSJ are now saying that the falling UK currency will boost foreign tourism and make agricultural exports from Britian very attractive to foreigners. It could, in their own words..
"boost exports of U.K. goods and rebalance the economy away from consumer spending, as policy makers have long sought to do."
Well, that's alright then. Go back to sleep, all is well in the UK.
But there is a reason that UK consumer spending is way down, People are broke or soon about to be. Unemployment is soaring and businesses are collapsing everyday. So the shift away from consumer spending is a slam dunk. But exports depend on production. UK Banks are not lending to anybody and won't be either. So farmers have had to cut the crop production as they cannot secure financing for larger crops for export and are currently at risk of being barely able to accomodate Domestic demand, as are farmers in the U.S.. They are in as much of a bind as everyone else; so much for increased exports.
As for foreign tourism, well we would be talking obviosly about American tourists with massive amounts of the greenback in their back pockets ready to spend it all in the land of Tea and Scones. But aren't Americans in a bind at the moment with vastly decreased consumer spending even on basic household items and food, never mind that Holiday in the Rain.
It's rubbish like this in the Mainstream Media that deflect readers away from the reality of what is actually happening. It's amazing the amount of people that one meets that are still under an illusion about what is actually in progress here. One glance at the Dow , just to make sure that is has not totally tanked is enough for everyone to go back to sleep. A strong dollar against the Euro is a signal that all is just dandy with the United States Economy. Move on, nothing happening here has been the order of the day. Why ? If the vast majority of the population were truly to realise exactly what the depth and gravity of this crisis amounts to, there would be lynchings on the streets, as George Bush Sr once alluded to, ( He actually said that "If the American people were to realise what we have done, they would chase us down the street and lynch us"), and a wholesale revolution to get rid of the criminals and their accomplices that got us all in to this mess.
On November 15th the Group of the 20 largest economic nations will sit down at the National Building Museum in Washington.This marks a momentous event as world leaders come together and try and come up with a solution to the current Global Financial Meltdown.The really interesting aspect about this one will be exactly what each will be bringing to the table. Each of the 20 nations have already enacted unilateral legislation and protectionist measures in a probably vain attempt to save their own respective asses. Currencies are down the river along with Banking and Industry so what exactly will be the cures that will come out of all this ? Pardon me if I seem a bit cynical, but my prognosis for this meeting is that there will be no cures for the people who are unemployed and / or homeless, starving, desperate, bankrupt. If anyone is to be saved it will be the same institutions that have been the beneficiaries so far in this, the greatest redistribution of wealth in World History. Banks will go away happy, secure in the knowledge that their bonuses have already been sent offshore, Presidents will go away happy as they dupe their public in to thinking that they have found the cancer and successfully operated on it . This will be a consolidation of power in to the hands of the Few. The cure will probably be presented in Newspeak that there are hard times ahead but our Governments are behind us all the way. We will be told that we can have it all back to the unsustainable way it was before but we will have to make sacrifices, except for the Financial Bosses of course. There might even be a new currency proposed. What would that do ? Change the lipstick on the Pig, who is still carrying a sack of IOU's on his back. This begs the question: How is all the Debt between the member countries going to be addressed. A currency manipulation can still restore some sort of seeming order in this chaos but only for balance sheets and not the Real Economy. The IMF and the U.S. can print money until they are blue in the face but that's not wealth, it's just paper. Once it's in the real economy it can only lead to hyperinflation. Expect a so far unsurpassed sleight of hand to address this. I reckon we have only seen the beginning of the sheer nonsense we have been subjected to by the likes of Paulson, Bernanke and the various heads of countries who have never seen the problem for what it was. Guys, it's not just the fact that you're Banking buddies blew it and had to sell one of their yachts; it's the fact that your friends, along with yourselves, have robbed the world of the wealth it had and put it in to your own pockets. It really is time to hold these crooks accountable. Bretton Woods 2 would be more useful as Nuremberg 2 but with the losers, not the Victors, behind the judges' bench.
So here's the limb I'm walking out on...
Let's consider the alternative...
Have no doubt, by the end of this week or the next, life will have changed for good, there will be no going back to the way it was. Period.
If the World is expecting to have it's cake and eat it , forget about it. So what's going to be the logical outcome of such a sytemic failure ?
If we were to play by the old rules, a fight for survival will ensue that will most likely end up in a War. Gee, that's going to help us out of this mess! Until the World realises that this is the time to realise that we need to change, but fundamentally. If we persist in the continuing worthless effort to fix a problem that cannot be fixed, then we just waste all that effort and capital in a fruitless exercise.
We can actually take what's left and make something good out of it if we have the courage and the foresight. But we will have to leave the old ways behind and return to a sustainable model.
So, what's the best way to go from here ?
Do we persist and destroy what's left of our world or do we admit to oursleves that we have been presented an opportunity , via extreme circumstances, to break the mold and start building something that will be actually sustainable ?
- Close all Banks and Financial institutions now.
- Stop paying taxes.
- Count what's actually left in the public coffers.
- Put all of it in a central fund for now.
- Sack all Governments Now.
- Disband the Stock Exchange.
- Prohibit speculation on commodities that people need to survive.
- Form Local Community Boards across every country in the World.
- Hold Local elections for membership.
- Setup Local funds for each Local Board.
- Distribute the remaining wealth to the local boards.
- Charge the Local boards with one duty and one only: Serve their electorate. Period.
- Form cooperatives between local Boards to use the resources of each for the benefit of all including transport infrastructure and natural resources.
- Count all the Pennies, Yen, Kroner, Dollars, Yuan, etc etc and burn them all. Form a new monetary system , backed by something solid like Gold or Silver (Wait a minute, they used to do that for 5000 years). Do not under any circumstances depeg the currency from the Gold / Silver backing it. (Nixon, you gangster)
- Now reset the counters to Zero and start again.
Let's consider the alternative...
Have no doubt, by the end of this week or the next, life will have changed for good, there will be no going back to the way it was. Period.
If the World is expecting to have it's cake and eat it , forget about it. So what's going to be the logical outcome of such a sytemic failure ?
If we were to play by the old rules, a fight for survival will ensue that will most likely end up in a War. Gee, that's going to help us out of this mess! Until the World realises that this is the time to realise that we need to change, but fundamentally. If we persist in the continuing worthless effort to fix a problem that cannot be fixed, then we just waste all that effort and capital in a fruitless exercise.
We can actually take what's left and make something good out of it if we have the courage and the foresight. But we will have to leave the old ways behind and return to a sustainable model.
So, what's the best way to go from here ?
Do we persist and destroy what's left of our world or do we admit to oursleves that we have been presented an opportunity , via extreme circumstances, to break the mold and start building something that will be actually sustainable ?
"Foreclosure filings last month were up nearly 50 percent compared with a year earlier, according to one company's count released yesterday. Nationwide, 261,255 homeowners received at least one foreclosure-related filing in May, up 48 percent from the same month last year, and up 7 percent from April" Realtytrac.com.
The figures above reflect a truly miserable situation in the everyday life of Americans. Before the property is actually foreclosed upon, the utilities would probably been off for 3 months or so. No light, no heat no water.This is the reality that the Fed is ignoring as it hands out money hands over fist to the very organisations that caused this untenable situation.
Not only is the Fed failing to address this misery in their midst, they would actually seem to be actively exacerbating it.
Let's look at what has been going on in the last few days with the Economic stimulus package proposed by Paulson...
So far, the Government handouts have been given to banks with no strings attached such as easing the burden on householders who still just about are in thier home. That decision is totally up to the Banks. They were "encouraged" to help avoid preventable foreclosures. Their unsurpassed generosity in this regard makes Scrooge look like a philanthropist ! Funny, I don't remember any hesitation or malingering when Paulson was trying to get the Bailout Bill out as fast as he could. His main priority was and always will be the Banks and the financial houses, with whom, he has a long standing relationship.
When Sen Richard C Shelby asked "Why aren't you insisting that they not hoard the money?" the only response was that if there were too many strings attached to the financial offerings being made to the banks they might not enroll in the program. Let me get this straight, banks are going to snub their noses at a free handout from the same people they are throwing out of their homes and just might say no because they might have to give a tiny amount of it back ? Please !
So basically what the banks got was an FDIC backed guarantee scheme where the loans were guaranteed by the latter. There was no guarantee that the homeowners would be actually given the funds to help them pay off their mortgage which, in theory, would give the Banks the cushion they were asking for. So the point to take home here is that the taxpayers own money has been taken from them and given freely to the Banks so that they feel all warm and fuzzy while the Homeowners themselves still face the high probability that the Bank will cut them no break at all and end up with a far from warm and fuzzy feeling as they pitch their tent alongside the ever growing numbers of others who have fallen prey to the Credit establishment.
Criminally negligent mortgage packages were used to entice buyers to chain themselves to bricks and mortar while their jobs were being exported overseas.
Adjustable rate mortgaes, Interest Only mortgages were given the heavy sell to overoptimistic buyers who were assured by Governement and Wall St that they had nothing to lose as property could only increase in value.They were set up for the fall as Interest rates were reset just around the time that property values were sliding downhill fast. The owners who had interest only mortgages or ARM's suddenly found themselves with negative equity in their homes and hugely increased monthly payments with no access to more credit to pay the bills.
Adjustable rate mortgages weredesigned to have exactly the same result; Get the Homeowner to leverage himself lighttly at the start with the sting in the tail just far enough away that they would not really think about it.If this sounds like a setup, then you'd be absolutely right. Can you say "Destruction of the Middle Class" .
But the most destructive part of this equation was the packaging up of the Mortgages in to Hedged derivatives, the result of which we are seeing now. But the guys who created and dealt with these Frankensteins have already made their fortunes with them and are not exposed to them anymore. Sure their Bank might fail and bring down a dozen others with it but, Hey, they already have the tickets bought to the Bahamas.
The figures above reflect a truly miserable situation in the everyday life of Americans. Before the property is actually foreclosed upon, the utilities would probably been off for 3 months or so. No light, no heat no water.This is the reality that the Fed is ignoring as it hands out money hands over fist to the very organisations that caused this untenable situation.
Not only is the Fed failing to address this misery in their midst, they would actually seem to be actively exacerbating it.
Let's look at what has been going on in the last few days with the Economic stimulus package proposed by Paulson...
So far, the Government handouts have been given to banks with no strings attached such as easing the burden on householders who still just about are in thier home. That decision is totally up to the Banks. They were "encouraged" to help avoid preventable foreclosures. Their unsurpassed generosity in this regard makes Scrooge look like a philanthropist ! Funny, I don't remember any hesitation or malingering when Paulson was trying to get the Bailout Bill out as fast as he could. His main priority was and always will be the Banks and the financial houses, with whom, he has a long standing relationship.
When Sen Richard C Shelby asked "Why aren't you insisting that they not hoard the money?" the only response was that if there were too many strings attached to the financial offerings being made to the banks they might not enroll in the program. Let me get this straight, banks are going to snub their noses at a free handout from the same people they are throwing out of their homes and just might say no because they might have to give a tiny amount of it back ? Please !
So basically what the banks got was an FDIC backed guarantee scheme where the loans were guaranteed by the latter. There was no guarantee that the homeowners would be actually given the funds to help them pay off their mortgage which, in theory, would give the Banks the cushion they were asking for. So the point to take home here is that the taxpayers own money has been taken from them and given freely to the Banks so that they feel all warm and fuzzy while the Homeowners themselves still face the high probability that the Bank will cut them no break at all and end up with a far from warm and fuzzy feeling as they pitch their tent alongside the ever growing numbers of others who have fallen prey to the Credit establishment.
Criminally negligent mortgage packages were used to entice buyers to chain themselves to bricks and mortar while their jobs were being exported overseas.
Adjustable rate mortgaes, Interest Only mortgages were given the heavy sell to overoptimistic buyers who were assured by Governement and Wall St that they had nothing to lose as property could only increase in value.They were set up for the fall as Interest rates were reset just around the time that property values were sliding downhill fast. The owners who had interest only mortgages or ARM's suddenly found themselves with negative equity in their homes and hugely increased monthly payments with no access to more credit to pay the bills.
Adjustable rate mortgages weredesigned to have exactly the same result; Get the Homeowner to leverage himself lighttly at the start with the sting in the tail just far enough away that they would not really think about it.If this sounds like a setup, then you'd be absolutely right. Can you say "Destruction of the Middle Class" .
But the most destructive part of this equation was the packaging up of the Mortgages in to Hedged derivatives, the result of which we are seeing now. But the guys who created and dealt with these Frankensteins have already made their fortunes with them and are not exposed to them anymore. Sure their Bank might fail and bring down a dozen others with it but, Hey, they already have the tickets bought to the Bahamas.
The flight of capital to the dollar has been churning along at breakneck speed over the last week, taking down other currencies with the sole exception of the Japanese Yen. Investors are running home to Mama while waiting to start the Musical chairs again next week and hoping to find one when the music stops.
The Yen is now being seen as a safe currency along with the dollar because nearly every other currency is either totally destroyed or on the way to being so. The kicker for the Japanese is that now, they have just priced themselves out of their already severely crashed exports market.
Investors and governments alike are seeking a cliff ledge to hang on to as all around them is headed to the bottom, which is a long way off yet. Here we have that word again, and it cannot be repeated too often, Derivatives! The Bank of International Settlements latest figures indicate a total of $512 trillion dollars in nominal Outstanding derivatives in all sectors.
Breaking it down we have
- $393 trillion in Interest rate derivatives
- $58 trillion in Credit default swaps
- $56 trillion in currency derivatives
- $71 trillion in UNALLOCATED derivatives
No wonder the panic has set in, everybody knows what is on the horizon but nobody really wants to talk about it.
The flight to the dollar is primarily because of the Dollar denomination of the Derivatives market; if you are going to try and unwind your exposure, you need to have dollars in hand to do it. Dollars are still the currency of world trade in Oil and other commodities so everyone needs to have cash in hand even for the dramatically reduced trade volume that we are seeing right now. US Treasuries are about the most popular "safe" haven investment right now. This has caught nearly every finacial analyst off guard. Stunned is the word actually. How could anyone want to put thier eggs in Uncle Sam's basket ? Was it not Uncle Sam that unleashed this storm on the world ?
Right now, nobody seems to be caring about economic fundamentals as the investing community has turned in to a herd of Wildebeest in the Lion's Den. But , once all of that toxic paper comes home to roost and institutions are falling apart at breakneck speed and the whirlwind unleashed by the Derivatives payback strarts to calm down, then it will be time to look around to see who is left standing. The US cannot as it has no basic soundness whatsoever in it's economic model; just a nation that has consumed more than it could chew and never gave anything back in return except for more debt. China's export driven rise to economic power will have dried up, India will be reduced back to what it was before the outsourcing revolution, most smaller European countries will have gone bankrupt along with Iceland, Pakistan and Argentina and who knows who else.
A new dawn will have arrived and what remains of the old world will have to be transformed to fit the new realities. Basically there is not enough cash on the planet to pay the Piper on this one.
In these days of rapid changes in the Political paradigm, it's becoming obvious that the U.S. has overestimated the confidence it expects from the rest of the world. The fragmentation had already begun but is now accelerating as each country realizes the damage that faith in Uncle Sam's integrity, both financial and moral, can unleash.
From Taipei to Dublin, Governments which are by their nature the largest investors, are abandoning the ship as they realize that their own economies are being dragged down by the biggest economic grift in modern history perpetuated by the United States of America. The past confidence in US backed Bonds and securities is fast deteriorating as the rest of the world realizes that, a country, being an economic entity just like any large corporation, is only as valuable as it’s assets and liabilities.
We have seen this realization come along as Iceland Hungary, South Africa, Pakistan and South Korea are knocking on the IMF front door and looking for a helping hand, much the same as Banks have been doing to their governments ever since the consequences of their insane and greedy actions were finally realized. Leverage, Leverage, Leverage. It has been the new mantra in the Alchemy of creating wealth where there is none. Leverage only signifies risk and risk by it’s definition is not something that you want to pay your grocery bills with every week. Imagine that you would eat or not eat, sleep in your house or on the street, clothe your children or have them freeze all on the turn of a dime in the nefarious and manipulated Ponzi scheme that is the “Investment” world ?
You would not, as your family is your biggest priority and you reduce to the absolute minimum the potential risks to which you are exposed to ensure that they are safe, warm and well fed.
It’s unfortunate for us that Governments the world over were only too happy to go along with the crazies that were running the investment banks, the Hedge funds, the Mutual funds etc etc. Doing so guaranteed them corporate donations and a cushy place on one of their boards after they left the equally corrupt political arena. The revolving door has been spinning ever since there was a government and a merchant.
It was a given that Asia, especially China and Japan, and the Middle east oil kingdoms could not dump the dollar as their foreign reserves and thus their real value was joined at the hip to a Fiat currency. This relationship, while it kept industry flowing and brought forth the industrial might of China and Japan, was always one that was subject to the health of the U.S. and the soundness of it’s economic plinth. The destruction of that plinth and it’s rendering in to dust by deliberate policy decisions by the U.S. financial/government elite has now arrived like a tornado in the faces further East.Japn is now on the brink of collapse as their exports have plummeted and their Yen has also priced itself out of a viable export market as other currencies decline.
From the Asian Investor Online..
“Taiwan's financial regulators reportedly have ordered that nation's insurance companies to pare their holdings of the debt and mortgage-backed securities of Fannie Mae (ticker: FNM), Freddie Mac (FRE) and Ginnie Mae securities, according to a report on the Internet site of Asian Investor magazine.”
The U.S. government has poured billions of its taxpayers’ money in to these institutions for nothing. The value of the securities from these agencies relies on the state of the US housing market which is in its last death throes before ending up as a stain on the carpet. But this is a seminal illustration of the fallacy and bizarre investment logic that is the root core of the mess we find ourselves in today. And deserves an explanatory tale that does not have a happy ending…
Imagine your employer proposed to you that your wages, to feed your family and sleep under a roof, would be based on how many apples his orchard produced every year would you accept the offer Sure there would be years where the sun would shine and the frost go away before the blossoms appeared but there would be other years where the harvest would fail through uncontrollable circumstances.
If you signed up to the deal, your boss is happy and you mistakenly are happy to take the risk because this could mean extra wealth and comfort for your family. You would indeed be crazy to go for an arrangement like this but foreign Governments have been doing it for years because it’s not THEIR money or livelihood that is at stake but that of their “Family” which they are honor bound to protect but have forgotten completely about.
Slowly the realization dawns that the Apple grower has been secretly removing the topsoil from his orchard and selling it to his neighbor at a good profit. The orchard starts to suffer and the crops begin to fail. The apple farmer is still OK because he pays lower wages and makes a profit by selling the topsoil. Since the wages of the employee have been falling, his purchasing power has been falling along with it. Reduced Purchasing power ie consumer spending results in less demand for goods. The healthy response to this should be that prices reduce to enable sellers to continue to operate and purchasing power returns to the consumer.. But what the government has been doing is to interfere in this basic process and pump more liquidity in the form of easy credit in to the money supply. This restores the prices to higher levels as inflation kicks in. So now, the Boss’s employees have to pay for their groceries with borrowed money with its accompanying interest and soon finds himself living beyond his means. The credit companies are happy, the boss is happy but the consumer has just been raped. That happy feeling that the credit companies feel is based on the fact that if the consumer fails to meet his repayments, they can just force him to sell his house and then recuperate their money along with the interest. The Boss is happy that he has used his business to make a lot of profit for himself and his family out of his exploitation of his workforce and no matter what happens in the real economy he will be fine as he has stashed his nest egg away for the rainy days to come. But his hubris is about to be destroyed by his nemesis as his trust in the system of greed and leveraging will come home to destroy him in the form of a Stock Market Crash. Sound familiar yet ?
When you multiply this arrangement 10 million times with the resultant reduced consumer spending, the increased housing inventory, the increased number of people who cannot afford to buy any of this inventory, the increased unemployment because of the reduced demand for goods, the only results are falling house prices and increased poverty. Still not too bad as the creditors can just swipe up the properties and put them on their asset sheet. But as time goes on the value of these assets drops lower. When they were actually high during the real estate bubble, created by the Fed and Treasury working in concert, the Investment companies came up with the most brilliant and the at the same time the most insane virtual wealth creation in financial history. Mortgage backed securities and derivatives which are basically an insurance sold on the value of the underlying asset, in this particular case (and there are many more) the value of property. The extra leverage they could achieve on these creations is on an order of 30% or more. What his means is that the Credit Companies, and by these we are talking about Banks and investments houses etc, have inflated their assets by 30% of their actual value. Now if the real value is the value of a property then what happens when the house price plummets ? The actual loss on the asset sheet is 30 times greater as it would be if they had not leveraged the mortgage in the first place. But greater leverage when times are good means huge profits and bonuses so who are they to complain.
We have seen this asset unwinding over the last year as reality set in and the underlying asset value has deteriorated dramatically because of rising unemployment and poverty. It does not seem a long stretch to say that the Government has deliberately impoverished their own population. But that’s another matter for later..
But back to Taiwan and it’s shunning of “Government backed securities” The Taiwanese government had invested heavily in the latter in the uninformed belief that the American economy was sound and their investments were safe. Just goes to show, you don’t have to be a genius to be a central banker. Governments all over the world bought the same snake oil from Uncle Sam, in part helped by the Godzilla of corporate propaganda and Wall St.. In my own opinion, I think them calling foul now and casting the blame, no matter how well deserved, on the U.S. speaks to their own lack of intelligent forward planning and concern for the welfare of their electorate.
So what we are seeing here is the inevitable disappearance of trust which started out as one between banks, investors and corporations and now has spread to a disappearing trust between nations.
We have seen France call foul on Ireland over Bank deposit guarantees (see http://meltdown101.livejournal.com/8177.h
This weekend, Asia and European nations are sitting down to try and work a way out of the mess between themselves, deliberately excluding the U.S for the moment. Well let’s face it , who would want Uncle Sam at the table ?
Nicholas Sarkozy is now blaming the Irish Prime Minister, Brian Cowen, for igniting a bank deal crisis.
I am Irish and think that the Irish Government plan was about as stupid as you could possibly get but, when Nicholas Sarkozy stands up and pretends to be the bastion of Economic Sagesse, well excuse me, I gotta have my say as this galls me.
King Nicholas, you gotta be kidding ! Your hair brained schemes , a la Paulson et Bernanke, are about as idiotic as those of the Irish Prime Minister, Brian Cowen. Ireland DOES NOT HAVE 500 Billion Euros. Period. Ireland needs to spend what money it has in develpong as much independence from foreign supplies of Energy as it can, invest in it's rail infrastructure, stop wasting money on new Highways that nobody will drive along , invest in Wind, Tidal energy which it has in bountiful supply, rid itself of all the accessories of largesse which it only possessed by the grace of easy credit and foreign benefactors, construct a real home grown manufacturing base that supplies the needs of it's population and can stand on it's own two feet without foreign aid.
As each European country polarises itself and realises that , basically, it's on it's own,this is the time to be clever with remaining monetary and labour resources. The latter need to be put in to something that the country will actually receive benefit from, not wasting it trying to recreate the unsustainable circumstances that continue to exact a dear price on the country's population.
La France, no matter what you say, cannot afford either to waste valuable capital on French Banks that have reaped their own whirlwind and duped the French public in to thinking that they were the epitome of The Wise, responsible investors. Why don't you come down, Nicholas, to the South or visit the Banlieus of Paris or Lyon once again, this time without your sneering rascist undercurrents - you won the election already so relax a little - and see where you could actually spend money to help the people you were elected to take care of ? Or are you just another jumped up King of Crony Capitalism, pimped in to power like your buddy (He's still your Buddy Nic, right?) George Bush to do the bidding of the International Banking Cartel ?
The financial rescue flim flams from all European countries are exactly that.It's meant to be a "Confidence" building measure. But Confidence for whom ? Only the Banks and the High Priests of the Cac,Dax and FTSE who see the passing of a comet as something portentious. With every bank in the world trying desperately to cover their bad loan portfolios, their precarious derivative positions, they have no intention, Zip, Nada, of actually putting the money back in to the hands of people who actually need it. It's all for them to cover their own greedy shenanigans. They are only part of the problem, the real problem is that the world was sold the easy credit scam, bolstered strongly by Government disinformation and it's flagrant bastardisation of Economic fundamentals, and the results are evident. You can't have it both ways, It's either a healthy economy with foresight and a responsible Government, or an imaginary one where basic economic principles are blissfully ignored to the eventual detriment of all. So come on Nicholas, step up to the plate, be a Man. Stop blaming others for doing the same idiotic things as you are. Just because Brian Cowen screwed the pooch doesn't mean you don't have a chance to do something constructive. If you are going to stand up and cry foul, at least have the wisdom to suggest something useful and give some hope to the people who elected you.
I am Irish and think that the Irish Government plan was about as stupid as you could possibly get but, when Nicholas Sarkozy stands up and pretends to be the bastion of Economic Sagesse, well excuse me, I gotta have my say as this galls me.
King Nicholas, you gotta be kidding ! Your hair brained schemes , a la Paulson et Bernanke, are about as idiotic as those of the Irish Prime Minister, Brian Cowen. Ireland DOES NOT HAVE 500 Billion Euros. Period. Ireland needs to spend what money it has in develpong as much independence from foreign supplies of Energy as it can, invest in it's rail infrastructure, stop wasting money on new Highways that nobody will drive along , invest in Wind, Tidal energy which it has in bountiful supply, rid itself of all the accessories of largesse which it only possessed by the grace of easy credit and foreign benefactors, construct a real home grown manufacturing base that supplies the needs of it's population and can stand on it's own two feet without foreign aid.
As each European country polarises itself and realises that , basically, it's on it's own,this is the time to be clever with remaining monetary and labour resources. The latter need to be put in to something that the country will actually receive benefit from, not wasting it trying to recreate the unsustainable circumstances that continue to exact a dear price on the country's population.
La France, no matter what you say, cannot afford either to waste valuable capital on French Banks that have reaped their own whirlwind and duped the French public in to thinking that they were the epitome of The Wise, responsible investors. Why don't you come down, Nicholas, to the South or visit the Banlieus of Paris or Lyon once again, this time without your sneering rascist undercurrents - you won the election already so relax a little - and see where you could actually spend money to help the people you were elected to take care of ? Or are you just another jumped up King of Crony Capitalism, pimped in to power like your buddy (He's still your Buddy Nic, right?) George Bush to do the bidding of the International Banking Cartel ?
The financial rescue flim flams from all European countries are exactly that.It's meant to be a "Confidence" building measure. But Confidence for whom ? Only the Banks and the High Priests of the Cac,Dax and FTSE who see the passing of a comet as something portentious. With every bank in the world trying desperately to cover their bad loan portfolios, their precarious derivative positions, they have no intention, Zip, Nada, of actually putting the money back in to the hands of people who actually need it. It's all for them to cover their own greedy shenanigans. They are only part of the problem, the real problem is that the world was sold the easy credit scam, bolstered strongly by Government disinformation and it's flagrant bastardisation of Economic fundamentals, and the results are evident. You can't have it both ways, It's either a healthy economy with foresight and a responsible Government, or an imaginary one where basic economic principles are blissfully ignored to the eventual detriment of all. So come on Nicholas, step up to the plate, be a Man. Stop blaming others for doing the same idiotic things as you are. Just because Brian Cowen screwed the pooch doesn't mean you don't have a chance to do something constructive. If you are going to stand up and cry foul, at least have the wisdom to suggest something useful and give some hope to the people who elected you.
This is the week when the Banks step out from behind the curtain and lay it all bare and it's not a pretty picture at all. But, it never was going to be anyway. Here's the losses for the third quarter alone.
What has Wall St to cheer about now ? With the remaing Q3 reports coming out over the next few days Wall St won't be getting much good news to shout about in order to pump up the vapid stock index again. The chips will start to fall as they were always destined to. No more bailouts, no more lies, no more money left to throw down the drain along with what went before. The domino effect has just received more impetus. As I have been saying, each loss and each failure leads to a systemic reaction as every part is shaken. When this butterfly flaps it's wings, it does actually cause a draft on the other side of the World.
- Wachovia: $29 Billion
- ING Group NV: $2.2 Billion in asset writedowns. Report to be published soon.
- Northern Trust Corp: $129.4 Million
- Fifth Third: $81 million
- VIST Financial Corp: $4.6 Million
- Sun Life Financial Inc: $396 Million
- JP Morgan Chase: 83% drop in year on year profit. $3.6 Billion writedown in Mortgage assets
- Washington Federal: $39.3 Million
- Credit Suisse: $1.7 Billion
- National City: $729 Million
- Citigroup: $13 billion in write-downs and credit losses
- Allstate Corp: $923 Million on insurance payouts and $1 Billion Investment losses
- Etrade: $50.5 Million
- Merril Lynch: $8.5 Billion
- Colonial Bank Group: $71 Million
What has Wall St to cheer about now ? With the remaing Q3 reports coming out over the next few days Wall St won't be getting much good news to shout about in order to pump up the vapid stock index again. The chips will start to fall as they were always destined to. No more bailouts, no more lies, no more money left to throw down the drain along with what went before. The domino effect has just received more impetus. As I have been saying, each loss and each failure leads to a systemic reaction as every part is shaken. When this butterfly flaps it's wings, it does actually cause a draft on the other side of the World.
Watch out below..Click for detail.
Yep, you saw it right.
Assets = 9.93 Trillion Dollars
Derivatives = 182.13 Trillion Dollars
This was at 30 June 2008 for the top 25 commmercial banks and trust companies.
Current exposure is currently a black hole.It has been revealed as each Bank has failed and it was time to pony up the cash. The thing to remember is that the 25 Banks are just one side of the Derivative equation. Like Lehman's , as one falls it takes another dozen with it. Counterparty Risk is a Bitch too.
Pop Quiz: how many of the banks above have gone Pop ? Who's next ?
Current TheStreet.Com Bank ratings..remember, anything under B-..be afraid.
http://www.thestreet.com/screener/index.h
JPMORGAN CHASE BANK NA C+
CITIBANK NATIONAL ASSN D+
BANK OF AMERICA NA B-
WACHOVIA BANK NATIONAL ASSN C- (Being absorebed by Wells Fargo)
HSBC BANK USA NATIONAL ASSN D+
WELLS FARGO BANK NA C
BANK OF NEW YORK B-
STATE STREET BANK&TRUST CO B-
SUNTRUST BANK C-
PNC BANK NATIONAL ASSN B-
MELLON BANK NATIONAL ASSN B
NORTHERN TRUST CO B-
KEYBANK NATIONAL ASSN C-
NATIONAL CITY BANK D
LASALLE BANK NATIONAL ASSN C-
MERRILL LYNCH BANK USA B-
REGIONS BANK C
RBS CITIZENS NATIONAL ASSN C
FIFTH THIRD BANK C
BRANCH BANKING&TRUST CO B-
FIRST TENNESSEE BANK NA D+
LEHMAN BROTHERS COML BK Adios
UNION BANK OF CALIFORNIA NA B-
DEUTSCHE BANK TR CO AMERICAS Unknown
That's a lot of Banks to be scared of. Valuation and ratings are based on real assets and possible exposure to worthless CDO's and Derivatives. Mortgage backed securities are obviously headed for the can. As more companies and Banks fail, the ratings of several of these banks will fall as they take the heat from their crushed companions. When General Motors fails it will take most of these with it because General Motors was one of the top derivative contracts in the market and just how many counterparties that will go to the wall is not exactly known but enough to have everybody scrambling around to save this obviously moribund creature from extinction to literally avoid their own.
Yep, you saw it right.
Assets = 9.93 Trillion Dollars
Derivatives = 182.13 Trillion Dollars
This was at 30 June 2008 for the top 25 commmercial banks and trust companies.
Current exposure is currently a black hole.It has been revealed as each Bank has failed and it was time to pony up the cash. The thing to remember is that the 25 Banks are just one side of the Derivative equation. Like Lehman's , as one falls it takes another dozen with it. Counterparty Risk is a Bitch too.
Pop Quiz: how many of the banks above have gone Pop ? Who's next ?
Current TheStreet.Com Bank ratings..remember, anything under B-..be afraid.
http://www.thestreet.com/screener/index.h
JPMORGAN CHASE BANK NA C+
CITIBANK NATIONAL ASSN D+
BANK OF AMERICA NA B-
WACHOVIA BANK NATIONAL ASSN C- (Being absorebed by Wells Fargo)
HSBC BANK USA NATIONAL ASSN D+
WELLS FARGO BANK NA C
BANK OF NEW YORK B-
STATE STREET BANK&TRUST CO B-
SUNTRUST BANK C-
PNC BANK NATIONAL ASSN B-
MELLON BANK NATIONAL ASSN B
NORTHERN TRUST CO B-
KEYBANK NATIONAL ASSN C-
NATIONAL CITY BANK D
LASALLE BANK NATIONAL ASSN C-
MERRILL LYNCH BANK USA B-
REGIONS BANK C
RBS CITIZENS NATIONAL ASSN C
FIFTH THIRD BANK C
BRANCH BANKING&TRUST CO B-
FIRST TENNESSEE BANK NA D+
LEHMAN BROTHERS COML BK Adios
UNION BANK OF CALIFORNIA NA B-
DEUTSCHE BANK TR CO AMERICAS Unknown
That's a lot of Banks to be scared of. Valuation and ratings are based on real assets and possible exposure to worthless CDO's and Derivatives. Mortgage backed securities are obviously headed for the can. As more companies and Banks fail, the ratings of several of these banks will fall as they take the heat from their crushed companions. When General Motors fails it will take most of these with it because General Motors was one of the top derivative contracts in the market and just how many counterparties that will go to the wall is not exactly known but enough to have everybody scrambling around to save this obviously moribund creature from extinction to literally avoid their own.
I was wondering yesterday exactly why the Dow and Nasdaq were so cheery yesterday. Alas, it didn't turn out to be very surprising.
Helicopter Ben is loading up the Black Hawk with even more of the Cash that the US just does not have and will be raining it down as the Festive season starts.
This time it's called "An Economic stimulus package". What's he trying to stimulate exactly ? Has Ben discovered a magic formula to cure all economic ills ?
Actually from his own statement..
"If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, home buyers, businesses and other borrowers"
Is there anyone home in the Brain of Bernanke ? By Improving access to credit by consumers, what he really means is that he would like to take taxpayer money and loan it back to the taxpayer at inflated interest. Happy Holidays America ,from Uncle Ben !
A few problems though..
Cash Strapped citizens in the US will not have access to any of this "Credit" as Banks, if they will lend at all, would only lend to people who still actually have jobs and a reasonable chance of keeping them for a while.
Measures to Help improve access to credit by consumers is what got everybody in to this mess in the first place.
What happened to the more than trillion dollars that were already stolen from Main street and given to Wall street Ben ? If it was to have done any good by now,well, we should be on the road to recovery; so why is unemployment rising. housing prices plummeting and an ever increasing amount of people eating out of dumpsters ?
He also said that "it would limit the longer-term impact on the government's budget deficit". Goddam Ben, you had to go to College to come up with that one ? Let me see, by throwing more money down the drain, you are actually reducing the amount of money you have previously thrown down the drain. Go figure. The fact the the mainstream media can print this garbage and still keep a straight face is, unfortunately, a sign of the times.
Now that Helicopter Ben & Co has everyone over a barrel they can talk complete crap and know they will get away with it from a completely dazed and desperate populace. The alarms are sounding but nobody's running out of the building.
Helicopter Ben is loading up the Black Hawk with even more of the Cash that the US just does not have and will be raining it down as the Festive season starts.
This time it's called "An Economic stimulus package". What's he trying to stimulate exactly ? Has Ben discovered a magic formula to cure all economic ills ?
Actually from his own statement..
"If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, home buyers, businesses and other borrowers"
Is there anyone home in the Brain of Bernanke ? By Improving access to credit by consumers, what he really means is that he would like to take taxpayer money and loan it back to the taxpayer at inflated interest. Happy Holidays America ,from Uncle Ben !
A few problems though..
Cash Strapped citizens in the US will not have access to any of this "Credit" as Banks, if they will lend at all, would only lend to people who still actually have jobs and a reasonable chance of keeping them for a while.
Measures to Help improve access to credit by consumers is what got everybody in to this mess in the first place.
What happened to the more than trillion dollars that were already stolen from Main street and given to Wall street Ben ? If it was to have done any good by now,well, we should be on the road to recovery; so why is unemployment rising. housing prices plummeting and an ever increasing amount of people eating out of dumpsters ?
He also said that "it would limit the longer-term impact on the government's budget deficit". Goddam Ben, you had to go to College to come up with that one ? Let me see, by throwing more money down the drain, you are actually reducing the amount of money you have previously thrown down the drain. Go figure. The fact the the mainstream media can print this garbage and still keep a straight face is, unfortunately, a sign of the times.
Now that Helicopter Ben & Co has everyone over a barrel they can talk complete crap and know they will get away with it from a completely dazed and desperate populace. The alarms are sounding but nobody's running out of the building.
We have been observing, since the election of Tony Blair, the usurpation of European power by Uncle Sam through it's proxies in Germany, The United Kingdom, Italy and France. Tony immediately started to do his master's bidding in 2001, later Angela Merkel in Germany would follow suit, Always obliging gangster Berlusconi was ready to do business but finally, the big Enchilada, Socialist France had to be won over.
Nicholas Sarkozy had already been chosen and groomed since the internal French unrest in predominantly North African suburbs of the large French Cities. He was presented as a figure who was plain spoken and would not tolerate disobedience to the Law.
Not that he was trying to help these people, that was never the point, he wanted to use them and the provoked situation which they became embroiled in to bolster his standing and perception in the eyes of the French people. He gambled on the race card and won.
Now, we are witnessing a nascent fragmentation of this European 5th Column who had sold their souls to Uncle Sam to be part of the big plan.
Berlusconi has just said that , Hey wouldn't it be kind of cool if we had Russia in the EU ?
Sarkozy and Bush are sparring with the definition of the New Financial Order, with George on the one hand, promoting the same Pig just with more Lipstick and Nicholas, on the other hand, hinting that the Pig was never such a great idea in the first place, No wonder Bush cancelled the real meeting until after the US Election.
With the Crisis under way, some leaders are beginning to realise that Uncle Sam won't be of much use to them as they do kind of have to answer to their populations and that Pig just ain't gonna fly no more. Choices are being made and pragmatism hopefully will prevail and Berlusconi has just opened the door. Now, we wait to see who will follow.
Nicholas Sarkozy had already been chosen and groomed since the internal French unrest in predominantly North African suburbs of the large French Cities. He was presented as a figure who was plain spoken and would not tolerate disobedience to the Law.
Not that he was trying to help these people, that was never the point, he wanted to use them and the provoked situation which they became embroiled in to bolster his standing and perception in the eyes of the French people. He gambled on the race card and won.
Now, we are witnessing a nascent fragmentation of this European 5th Column who had sold their souls to Uncle Sam to be part of the big plan.
Berlusconi has just said that , Hey wouldn't it be kind of cool if we had Russia in the EU ?
Sarkozy and Bush are sparring with the definition of the New Financial Order, with George on the one hand, promoting the same Pig just with more Lipstick and Nicholas, on the other hand, hinting that the Pig was never such a great idea in the first place, No wonder Bush cancelled the real meeting until after the US Election.
With the Crisis under way, some leaders are beginning to realise that Uncle Sam won't be of much use to them as they do kind of have to answer to their populations and that Pig just ain't gonna fly no more. Choices are being made and pragmatism hopefully will prevail and Berlusconi has just opened the door. Now, we wait to see who will follow.
BBC News this morning..
Takashi Ushio, head of the investment strategy division at Marusan Securities, was quoted as saying by Reuters news agency.
Takashi Ushio, head of the investment strategy division at Marusan Securities, was quoted as saying by Reuters news agency.
"Last week people were panicking over the financial system, nobody really knew what would happen. But now it's the real economy."
Yutaka Miura, senior strategist at Shinko Securities Co Ltd, said investors were particularly unnerved by a 1.2% fall in the value of US retail sales between August and September.
"It really confirmed a severe slowdown in the US economy," he told The Associated Press news agency.
If either of these guys needed confirmation that the US was in recession, then they should both be promptly fired and forbidden to manage anyone elses money for the rest of their life. If this is indicative of the abject stupidity that pervades the Investment community, then God Help us all .
This weekend saw the European Union distill their own version of the Mother of All Bailout Bills. A nice new shiny version with leather seats and a turbocharger....The problem: it will not address the fundamental Economic issues that need to be fixed. Without the latter, the former is like giving the addict more Heroin to kill themself rather than commiting them to Rehab.
The Plan:
- "Under the eurozone plan, members pledged to guarantee loans between banks until the end of 2009, and said they would put money into them by buying preference shares"
- Financial managers who are found to be negligent will be "Sanctioned"
Ok, 2 questions arise..
- Where are they going to get the money ?
- What difference will this make in the real economy of you and me ?
MARKET DATA - 10:02 UK
| FTSE 100 | 4157.17up | 225.11 | 5.72% |
| Dax | 4838.60up | 294.29 | 6.48% |
| Cac 40 | 3400.15up | 223.66 | 7.04% |
| Nasdaq | 1649.51up | 4.39 | 0.27% |
| BBC Global 30 | 4512.12up | 78.23 | 1.76% |
But, hold a sec, aren't these the same markets that have been "Rallying" every time Bernanke or Paulson smiled or gave the Banks more of the tapayers money? The reaction in the Stock markets has very little to do with reality. The volume of trading, if boosted, leads to a lot of dealers making a lot of money; That's it.
We will see the Dollar gain strength and possibly an anomalous fall in Gold prices and happy bankers, knowing that they have once again robbed us of capital that should be used for more constructive purposes like creating jobs and saving people from being kicked out of their homes.
Again we are not being told in the Mainstream news about the Elephant in the Parlor......DERIVATIVES
This multitrillion behemoth created by the financial sector over the last years has infested all Bank's asset sheets to an enormous degree.
After Lehman's CDO auction last week, see article (http://meltdown101.livejournal.com/4822.h
Take GM for instance. GM's stability and profit share has been an item upon which trillions of dollars worth of derivatives have been constructed. Now GM is floundering it's way around trying to save it's own ass while the banks who insured against a GM downfall are looking at another very enormous writedown on their balance sheets. This is just one example of how failures across the industrial spectrum can destroy seemingly unrelated parts. The days of the simple economic model has long since vanished and as a result of all this bogus investment packaging by the financial sector, they have signed their own Death Warrant because when the man comes knocking at the Door they have to pay up and pay up enourmously.
But, of course, they are being helped generously by the Taxpayer to soften the blow somewhat. But that's the real tragedy of bailing out banks, guaranteeing their loans, their deposits..it would never be enough to cover them from the Tsunami of Debt calls that are all waiting like Dominoes at their door and , unfortunately, at ours as well. So it will make no real difference if Banks start lending to each other again - they probably will not anyway - because their exposure remains.
My prognostication ?
All these Taxayer capital injections and Equity investments will not add more jobs, more housing construction, more retail sales, an easing of the national Federal debt, ease the absolute panic in China over the amount of garbage they now have in their foreign reserves, change what needs to be changed or help the Average Citizen. Why ? Because the tip of the Derivative Iceberg is rising at an accelerating pace as each domino topples over another ten at each fall. As it continues to rise, we do truly have Godzilla on the rampage. It's only been his baby Brother so far.
The Wall St Journal reported on October 13th that the U.S. Mint was broadening it's Freeze on the sale of Gold Bullion coins due to extraordinary customer demand.
http://online.wsj.com/article_email/SB1
Investors were running for the hills to have something with real worth in their portfolios.
As the WSJ intoned....
"Due to the extreme fluctuating market conditions for 2008, as well as current market conditions, gold and silver demand is unprecedented and the demand for platinum is unusually high,"
Production from mining cannot keep up with demand and Central Banks are not selling their allocated quota either..everyone is holding on to it.
Since then, the tide seemes to have turned as mounting panic extended even to the traditionaly reliable bastion of Gold. Hedge funds have been liquidating their portfolios (including Gold holdings) to avoid the wrath of their Investors and everyone decided that liquidity was infinitely more desirable than plunging portfolio values. This flooded the market with Gold for sale. How lucky for anyone with a bit of foresight...now is a wonderful time to grab it at bargain basement rates and wait for the soon to arrive Day of Reckoning.
But liquidity in what ? Dollars ? It's like a drowning man who jumps from one sinking piece of the ship to another, looking for something that will float above the abyss. The dollar and all the financial alchemy that props it up despite the cancerous nature of it's underlying support, is now in such vast quantity in the US and foreign economies that Hyperinflation becomes an inevitability that nobody really wants to think about especially the holders of US IOU's ie T Bills. It is indeed a very frightening time for Central Bankers who, inevitably, will have no choice but to cut Uncle Sam's credit card in two and ask him for Real Money.
These same hedge fund managers are the same ones who lost their clients' wealth by playing Russian Roulette with their clients money and lost miserably. So now they are trying to find a safe haven before their portfolios are worth a big fat Zero. Liquidity might be a temporary breather but as each week passes we see reality based Economics coming more in to play.
Every analyst worth his or her salt, is predicting that Gold will see a monumental rise once investors realise that they have to leave the stage and stop relying on the vacuous thinking that got them into this pickle in the first place. But, like all Behemoths, Wall St and it's Financial Alchemists won't die an easy death and continue to prance around the stage like Emperors with no clothes.
The "third worldisation" of Iceland with a population of around 300,000 in less that a week was a graphic illustration of what is to come but , in their case, arrived in a very short space of time. The rest of the world is seeing it in almost slow motion as each domino knocks over another ten. But, there's a lot of Dominos out there and the falls are becoming more accelerated every week.
Each move that Governments make by throwing more money at the problem just makes the inevitable outcome even worse and the payback even more of a bitch. Banks have not started to lend in any significant terms to businesses for them to invest in greater production and the irony is that even if they did , there's fewer and fewer people with the cash to buy the goods. Populations everywhere are being driven in to poverty and businesses are closing at an accelerating rate. These are the factors which will determine the outcome of the current financial storm; without real capital and real production, being consumed by people with cash in their pockets, there is no remedy to this situation. Talk about putting the cart in front of the horse !
With each donation of public money to the very people who got us all in to this mess, they are subtracting from the potential funds which could be used constructively to build a new base of an intelligently conceived Economic model.
The "Credit Crisis" is a peculiar term for what the world currently finds itself in now as it was the unleashing of "Credit" that blew up the bubble until it burst. There's no having your cake and eating it here. Unless people are working in well paying jobs and actually making things instead of just consuming them, the writing will remain on the wall and the resultant catastrophe will be inevitably worse.
http://online.wsj.com/article_email/SB1
Investors were running for the hills to have something with real worth in their portfolios.
As the WSJ intoned....
"Due to the extreme fluctuating market conditions for 2008, as well as current market conditions, gold and silver demand is unprecedented and the demand for platinum is unusually high,"
Production from mining cannot keep up with demand and Central Banks are not selling their allocated quota either..everyone is holding on to it.
Since then, the tide seemes to have turned as mounting panic extended even to the traditionaly reliable bastion of Gold. Hedge funds have been liquidating their portfolios (including Gold holdings) to avoid the wrath of their Investors and everyone decided that liquidity was infinitely more desirable than plunging portfolio values. This flooded the market with Gold for sale. How lucky for anyone with a bit of foresight...now is a wonderful time to grab it at bargain basement rates and wait for the soon to arrive Day of Reckoning.
But liquidity in what ? Dollars ? It's like a drowning man who jumps from one sinking piece of the ship to another, looking for something that will float above the abyss. The dollar and all the financial alchemy that props it up despite the cancerous nature of it's underlying support, is now in such vast quantity in the US and foreign economies that Hyperinflation becomes an inevitability that nobody really wants to think about especially the holders of US IOU's ie T Bills. It is indeed a very frightening time for Central Bankers who, inevitably, will have no choice but to cut Uncle Sam's credit card in two and ask him for Real Money.
These same hedge fund managers are the same ones who lost their clients' wealth by playing Russian Roulette with their clients money and lost miserably. So now they are trying to find a safe haven before their portfolios are worth a big fat Zero. Liquidity might be a temporary breather but as each week passes we see reality based Economics coming more in to play.
Every analyst worth his or her salt, is predicting that Gold will see a monumental rise once investors realise that they have to leave the stage and stop relying on the vacuous thinking that got them into this pickle in the first place. But, like all Behemoths, Wall St and it's Financial Alchemists won't die an easy death and continue to prance around the stage like Emperors with no clothes.
The "third worldisation" of Iceland with a population of around 300,000 in less that a week was a graphic illustration of what is to come but , in their case, arrived in a very short space of time. The rest of the world is seeing it in almost slow motion as each domino knocks over another ten. But, there's a lot of Dominos out there and the falls are becoming more accelerated every week.
Each move that Governments make by throwing more money at the problem just makes the inevitable outcome even worse and the payback even more of a bitch. Banks have not started to lend in any significant terms to businesses for them to invest in greater production and the irony is that even if they did , there's fewer and fewer people with the cash to buy the goods. Populations everywhere are being driven in to poverty and businesses are closing at an accelerating rate. These are the factors which will determine the outcome of the current financial storm; without real capital and real production, being consumed by people with cash in their pockets, there is no remedy to this situation. Talk about putting the cart in front of the horse !
With each donation of public money to the very people who got us all in to this mess, they are subtracting from the potential funds which could be used constructively to build a new base of an intelligently conceived Economic model.
The "Credit Crisis" is a peculiar term for what the world currently finds itself in now as it was the unleashing of "Credit" that blew up the bubble until it burst. There's no having your cake and eating it here. Unless people are working in well paying jobs and actually making things instead of just consuming them, the writing will remain on the wall and the resultant catastrophe will be inevitably worse.
Ah ha, it's amazing what you can find when you look around a little. My own bank, Credit Agricole in France, took the oppurtunity last week to make a pre-emptive strike against doubts about their integrity....
From the Email I received last week from the Director himself..
"Le Crédit Agricole du Languedoc est une banque coopérative et mutualiste, autonome et financièrement indépendante. Son activité est constituée essentiellement de la collecte de dépôts de ses clients et du financement des ménages, des professionnels, des agriculteurs et des entreprises locales. Elle n’a réalisé aucun investissement sur l’immobilier américain, ni en rapport avec des banques américaines."
Translation: "Credit Agricole du Languedoc is a financially independent, Autonomous part of a banking cooperative. Our primary activity consists of Customer deposits and the financing of Households, Professionals, Farmers and local businesses. It has never had any investments in US Subprime mortgages directly or in partnership with American Banks."
Now comes the curtain..
Source: http://www.credit-agricole-sa.fr/IMG/pdf/Q
From their own Financial report of this year. (Click image to enhance)
This, I imagine, included Lehman Brothers to which CA had an exposure of 383,995 Euros in Toxic Credit Default swaps which were auctioned off recently ar approx 10% value.
Source:: http://www.ft.com/cms/s/0/52098fa2-82e3-1
Have a look who else is on the List
I promptly sent the Bank an email requesting an explanation of this seemingly contradictory position on 11th October.
Update 26 Oct:
Another French Bank, Caisse d'Epargne, admitted it lost 466 Million Euros in a "Derivatives Trading incident" last week. Rumors of a big derivatives loss forced Societe Generale and Dexia to issue denials earlier. The French finance misister, Christine Lagarde has since announced that a special audit will now be undertaken to look at the books of all French Banks. I guess Credit Agricole will have some explaining to do.
I am still waiting on a response to my email.
From the Email I received last week from the Director himself..
"Le Crédit Agricole du Languedoc est une banque coopérative et mutualiste, autonome et financièrement indépendante. Son activité est constituée essentiellement de la collecte de dépôts de ses clients et du financement des ménages, des professionnels, des agriculteurs et des entreprises locales. Elle n’a réalisé aucun investissement sur l’immobilier américain, ni en rapport avec des banques américaines."
Translation: "Credit Agricole du Languedoc is a financially independent, Autonomous part of a banking cooperative. Our primary activity consists of Customer deposits and the financing of Households, Professionals, Farmers and local businesses. It has never had any investments in US Subprime mortgages directly or in partnership with American Banks."
Now comes the curtain..
Source: http://www.credit-agricole-sa.fr/IMG/pdf/Q
From their own Financial report of this year. (Click image to enhance)
This, I imagine, included Lehman Brothers to which CA had an exposure of 383,995 Euros in Toxic Credit Default swaps which were auctioned off recently ar approx 10% value.
Source:: http://www.ft.com/cms/s/0/52098fa2-82e3-1
Have a look who else is on the List
| Q2 2008 (€ m) | 2007 (€ m) | |
|---|---|---|
| Société Générale | 473,329 | 487,959 |
| Credit Agricole | 383,995 | 364,178 |
| BNP Paribas | NA | 597,578 |
| Natixis | NA | 202,928 |
| Barclays | 460,423 | 352,133 |
| Deutsche Bank | 1,138,090 | 1,193,131 |
| Credit Suisse | 277,362 | 331,807 |
| UBS | 652,972 | 757,271 |
| * European banks - outstanding trading positions with Lehman Source: JPMorgan estimates, Company data | ||
I promptly sent the Bank an email requesting an explanation of this seemingly contradictory position on 11th October.
Update 26 Oct:
Another French Bank, Caisse d'Epargne, admitted it lost 466 Million Euros in a "Derivatives Trading incident" last week. Rumors of a big derivatives loss forced Societe Generale and Dexia to issue denials earlier. The French finance misister, Christine Lagarde has since announced that a special audit will now be undertaken to look at the books of all French Banks. I guess Credit Agricole will have some explaining to do.
I am still waiting on a response to my email.
Today marks the Day when the Credit Default swaps that were on Lehman's books are auctioned....at 10cents on the dollar.
The estimated payout by Banks who were involved in these CDO's will be around $400,000,000,000 , yep, thats $400 Billion.
I already blogged why Banks have been hoarding cash instead of lending it, which was, as I remember, the point of the bailout bill.
So 700 less 400 is 300; $400 Billion dollars of the bailput money is to be used to cover one small part of the mess that they have created, which leaves $300 Billion. Do you reckon the Banks will hold on to that as well ? With the $512 trillion Derivatives market out there and the lack of exact knowledge of these unregulated transactions, there is no way that Banks are going to lend out money to anyone when they know that another giant hammer is about to fall afer CDO's. The aforementioned CDO exposure is for Lehman's Alone!
So the CDO exposure's mount up with each failed Bank. It's Dominos like we have never seen. One falls and takes another ten with it.
So don't expect Banks starting to loan money to businesses and Citizens who need it, any time soon.
Like I have been saying since the start, each week get's worse and we are far away from having witnessed the worst.
I have already started to empty my Bank Account with Credit Agricole in France and am moving it in to Banque Postale as the latter is 100% guaranteed under French Law. The French, when they do make laws, are apt to take them seriously.
On a more hopeful note....if you want to actually invest your money rather than devalueing it by putting it under your bed, buy physical Gold or Silver. You will notice that over the last few weeks that Coin dealers are running out of stock and marking higher premiums on all their coins. This paired with just one other factor ie Central Banks are NOT selling Gold that they have, both lead every Analyst I have read come to the same conclusion: Individuals and Governments and Investing institutions alike are all looking for something of REAL value during catastrophic times and that's Gold and Silver. Sounds Biblical but Gold and Silver have been used for millenia to conduct commerce and now, more than ever, represents an actual asset.
Keep an eye on Gold's rise, but get in to it NOW if you have any spare cash around.Empty your Bank account NOW.. If you want to avoid the Premiums associated with Gold and Silver Coins, buy it online on a regulated exchange where your assets are stored in Vaults in Zurich, London and New York. ( "Buy Gold Online" link in the left column) My advice..do not store your gold in New York..there is already legislation in the US which provides for the seizure of all privately held gold in the event of an Economic Emergency (Hello, I thought I saw one pass by! ) So Zurich is probably the safest of them all.
This makes for very interesting viewing !
Putting the pieces together in a timeline looks something like this..
Sep 30 2008
3rd Infantry’s 1st BCT is now home on US soil and whose mission it is to deploy to American streets in the evnt of "Civil unrest"
Source: http://www.armytimes.com/news/2008/09/a
Oct 2006
George Bush struck down Posse Comitatus, thus making it legal for military to patrol the U.S. He has also legally established that in the "War on Terror," the U.S. is at war around the globe and thus the whole world is a battlefield. Thus the U.S. is also a battlefield.
He also led change to the 1807 Insurrection Act to give him far broader powers in the event of a loosely defined "insurrection" or many other "conditions" he has the power to identify. The Constitution allows the suspension of habeas corpus -- habeas corpus prevents us from being seized by the state and held without trial -- in the event of an "insurrection." With his own army force now, his power to call a group of protesters or angry voters "insurgents" staging an "insurrection" is strengthened.
Source: http://en.wikipedia.org/wiki/Posse_Comi
Roughly translated; The President of the United States now has the power, through "Signing statements" and executive orders to declare Martial Law in the US if he deems that there exists an "Emergency" . The definition is so broad that this can include a run on the banking system, mass protests by citizens who know damn well they just got raped as never before, or an "Economic Crisis".
Now think back to the time that George Bush said "It would be much easier if I were a dictator"
Hasn't his dream just come through ? All he has to do is declare an emergency and , that's it, Game Over. The executive branch is the sole authority in this scenario. Congress is suspended, elections are cancelled and US soldiers and Blackwater mercenaries patrol American streets.
Sound a bit far fetched ? It's all there in legislative black and white and if you do not think that the Executive will not hesitate to use the powers they now have, then have a think about what has happened during the last 8 years of the most dictatorial, unconstitutional Governent the US has ever known.
Putting the pieces together in a timeline looks something like this..
Sep 30 2008
3rd Infantry’s 1st BCT is now home on US soil and whose mission it is to deploy to American streets in the evnt of "Civil unrest"
Source: http://www.armytimes.com/news/2008/09/a
Oct 2006
George Bush struck down Posse Comitatus, thus making it legal for military to patrol the U.S. He has also legally established that in the "War on Terror," the U.S. is at war around the globe and thus the whole world is a battlefield. Thus the U.S. is also a battlefield.
He also led change to the 1807 Insurrection Act to give him far broader powers in the event of a loosely defined "insurrection" or many other "conditions" he has the power to identify. The Constitution allows the suspension of habeas corpus -- habeas corpus prevents us from being seized by the state and held without trial -- in the event of an "insurrection." With his own army force now, his power to call a group of protesters or angry voters "insurgents" staging an "insurrection" is strengthened.
Source: http://en.wikipedia.org/wiki/Posse_Comi
Roughly translated; The President of the United States now has the power, through "Signing statements" and executive orders to declare Martial Law in the US if he deems that there exists an "Emergency" . The definition is so broad that this can include a run on the banking system, mass protests by citizens who know damn well they just got raped as never before, or an "Economic Crisis".
Now think back to the time that George Bush said "It would be much easier if I were a dictator"
Hasn't his dream just come through ? All he has to do is declare an emergency and , that's it, Game Over. The executive branch is the sole authority in this scenario. Congress is suspended, elections are cancelled and US soldiers and Blackwater mercenaries patrol American streets.
Sound a bit far fetched ? It's all there in legislative black and white and if you do not think that the Executive will not hesitate to use the powers they now have, then have a think about what has happened during the last 8 years of the most dictatorial, unconstitutional Governent the US has ever known.
Today we are a seeing a quantum leap in Economic theory. The Dollar price is being manipulated by Central Banks over the planet to prop up this completely worthless, Fiat currency backed by absolutely nothing but a red hot printing press.
Click the graphs for a detailed view.
This graph shows Dollar's historical relationship to the price of Gold since 1996.
This Graph shows the relationship between 29 Sep 2008 and today.
This is where the anomaly appears around 29 Sepember as Gold , virtually for the first time in 12 years goes above the related dollar value.
The Treasury and Central banks are working overtime to keep the Dollar artificially strong against the rising cost of Gold. It has been a principle for the last 12 years that the Dollar follows Gold. As the dollar weakens, Gold rises in Price as it is priced in dollars as in the above graphs. What this means in practical terms is that more and more dollars are flying off the printing presses and T Bills are being foisted on the world market to prop up the Dollar via foreign creditors like China who already has several trillion in their foreign reserves.China, by the way has been divesting itself of some of it's dollar holdings for some time now.With Iranian and Venezuelan Oil to be priced and traded in Euros or a basket of currencies in the near future, this signals the final nail in the Dollar coffin.However, some other factor may have already done it by then.
As more and more dollars are printed and the money supply increases at an ever increasing rate, the real consequence facing the US here is hyperinflation reminiscent of Germany in the 20's.
There is nothing that the US Treasury or Central Banks can really do about this as it is an historical fact that every Fiat based currency ever brought to life has been extinguished from existence.
For the moment, the shoe has not dropped completely on this one, but, with the evident intervention in the Dollar market as illustrated above, reality, as investors run away screaming from the US as a source of secure investment, will set in and Realworld market forces will finally have their say. This is totally inevitable as the economic basis of the sytem is being eroded at an exponential rate every passing day.
Click the graphs for a detailed view.
This graph shows Dollar's historical relationship to the price of Gold since 1996.
This Graph shows the relationship between 29 Sep 2008 and today.
This is where the anomaly appears around 29 Sepember as Gold , virtually for the first time in 12 years goes above the related dollar value.
The Treasury and Central banks are working overtime to keep the Dollar artificially strong against the rising cost of Gold. It has been a principle for the last 12 years that the Dollar follows Gold. As the dollar weakens, Gold rises in Price as it is priced in dollars as in the above graphs. What this means in practical terms is that more and more dollars are flying off the printing presses and T Bills are being foisted on the world market to prop up the Dollar via foreign creditors like China who already has several trillion in their foreign reserves.China, by the way has been divesting itself of some of it's dollar holdings for some time now.With Iranian and Venezuelan Oil to be priced and traded in Euros or a basket of currencies in the near future, this signals the final nail in the Dollar coffin.However, some other factor may have already done it by then.
As more and more dollars are printed and the money supply increases at an ever increasing rate, the real consequence facing the US here is hyperinflation reminiscent of Germany in the 20's.
There is nothing that the US Treasury or Central Banks can really do about this as it is an historical fact that every Fiat based currency ever brought to life has been extinguished from existence.
For the moment, the shoe has not dropped completely on this one, but, with the evident intervention in the Dollar market as illustrated above, reality, as investors run away screaming from the US as a source of secure investment, will set in and Realworld market forces will finally have their say. This is totally inevitable as the economic basis of the sytem is being eroded at an exponential rate every passing day.
Fractional Banking System
"A banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. This is done to expand the economy by freeing up capital that can be loaned out to other parties. Most countries operate under this type of system."
Bank Run
"A situation in which numerous bank customers try to withdraw their bank deposits simultaneously and the bank's reserves are not sufficient to cover the withdrawals. Bank runs are a result of panic"
To say the markets and the Economy at large is in a state of panic would be a huge understatement at best. The LIBOR or the rate at which banks lend to each other on overnight and longer term loans has increased as distrust has spread within the Financial sector. Banks are basically afraid to lend to each other and thus increases liquidity problems for the everyone. Banks are hoarding cash and not lending to each other or consumers. This is having a serious consequence for Economies where cash flow grinds to a halt and tips many businesses over the edge as financing is no longer available. The resultant set of dominos falling are increased layoffs, further share price deterioration, devaluation of the stock market,reduced tax base and an increased welfare bill for Government. Are you starting to panic yet ? Feel like withdrawing your savings and stashing them under your bed ?
So we have a situation right now where Governments are running to Guarantee Bank deposits.. Ireland said it would guarantee them up to a value of 400 Billion Euros, I began to wonder..Well Brian, where are you going to find a sum like this in Eire ? Has he seen the pot of gold over the rainbow or has he totally lost his faculties ?
Let's take Ireland as an example to see what kind of numbers we are talking about..
2008 Total estimated Tax revenue for 2008: 48.9 Billion Euros
2008 Total estimated non Tax revenue for 2008: 684 Million
2008 Total estimated Revenue: 49.594 Billion Euros
2008 Irish Exchequer Balance: -4.8 Billion Euros
So Brian, where does the 400 Billion come from ? The country already has a net negative balance of 4.8 billion euros.
This is Deposit guarantee scheme in Microcosm and the same situation can be said for other countries as well. The announcement is meant to "Shore up confidence" in the banking system. Sorry the banking system got themselves and the rest of us IN this mess because of highly imaginative accounting practices and the above seems from the same mold to me.
The reality of the situation is that Investors ARE panicking right now. The UK branch of the Icelandic bank Landsbanki, Icesave, an Internet based subsidiary, had to freeze withdrawals from customers on Tuesday. From a fractional banking standpoint, this chicken came home to roost with a reality check. There will be many more of these instances as this drama unfolds which has already claimed so many victims.
Another shoe on the way down..
Adjustable rate mortgages are being reset very soon which will see millions of homeowners around the world who are on the brink of going broke actually go broke and default on their mortgages. Another addition to the housing inventory and another addition to the Food Stamp Q and unemploymets line, all of which means less money and more government debt.
There comes a time when , even Politicians and stockbrokers have to face the music. Money does not grow on trees, it requires people who have jobs, pay taxes, buy houses, groceries, cars etc etc.. Once you take the rug out from under a functioning economy it just keels over ..how hard we wait and see.
"A banking system in which only a fraction of bank deposits are backed by actual cash-on-hand and are available for withdrawal. This is done to expand the economy by freeing up capital that can be loaned out to other parties. Most countries operate under this type of system."
Bank Run
"A situation in which numerous bank customers try to withdraw their bank deposits simultaneously and the bank's reserves are not sufficient to cover the withdrawals. Bank runs are a result of panic"
To say the markets and the Economy at large is in a state of panic would be a huge understatement at best. The LIBOR or the rate at which banks lend to each other on overnight and longer term loans has increased as distrust has spread within the Financial sector. Banks are basically afraid to lend to each other and thus increases liquidity problems for the everyone. Banks are hoarding cash and not lending to each other or consumers. This is having a serious consequence for Economies where cash flow grinds to a halt and tips many businesses over the edge as financing is no longer available. The resultant set of dominos falling are increased layoffs, further share price deterioration, devaluation of the stock market,reduced tax base and an increased welfare bill for Government. Are you starting to panic yet ? Feel like withdrawing your savings and stashing them under your bed ?
So we have a situation right now where Governments are running to Guarantee Bank deposits.. Ireland said it would guarantee them up to a value of 400 Billion Euros, I began to wonder..Well Brian, where are you going to find a sum like this in Eire ? Has he seen the pot of gold over the rainbow or has he totally lost his faculties ?
Let's take Ireland as an example to see what kind of numbers we are talking about..
2008 Total estimated Tax revenue for 2008: 48.9 Billion Euros
2008 Total estimated non Tax revenue for 2008: 684 Million
2008 Total estimated Revenue: 49.594 Billion Euros
2008 Irish Exchequer Balance: -4.8 Billion Euros
So Brian, where does the 400 Billion come from ? The country already has a net negative balance of 4.8 billion euros.
This is Deposit guarantee scheme in Microcosm and the same situation can be said for other countries as well. The announcement is meant to "Shore up confidence" in the banking system. Sorry the banking system got themselves and the rest of us IN this mess because of highly imaginative accounting practices and the above seems from the same mold to me.
The reality of the situation is that Investors ARE panicking right now. The UK branch of the Icelandic bank Landsbanki, Icesave, an Internet based subsidiary, had to freeze withdrawals from customers on Tuesday. From a fractional banking standpoint, this chicken came home to roost with a reality check. There will be many more of these instances as this drama unfolds which has already claimed so many victims.
Another shoe on the way down..
Adjustable rate mortgages are being reset very soon which will see millions of homeowners around the world who are on the brink of going broke actually go broke and default on their mortgages. Another addition to the housing inventory and another addition to the Food Stamp Q and unemploymets line, all of which means less money and more government debt.
There comes a time when , even Politicians and stockbrokers have to face the music. Money does not grow on trees, it requires people who have jobs, pay taxes, buy houses, groceries, cars etc etc.. Once you take the rug out from under a functioning economy it just keels over ..how hard we wait and see.
In these uncertain days, you can stay ahead of the curve in some ways.
One of the most important is knowing your Bank's Rating which is based on their Asset Portfolio amongst other variables.
Go to this site..
http://www.bankrate.com/brm/safesound/ra
At least you can keep an eye on things before you hear it in the news.
The recent House vote on the Bailout Plan was the seminal example of pouring good money after bad in to a bottomless pit.The Dow and Nasdaq plunged straight after the announcement and Americans finally realised just how blatantly they had just been royally screwed by a Government that has been royally screwing their citizens ever since that Black Day they entered Pennsylvania Avenue.
After the House first time around, rejected the Bill the Document went from the initial 3 pages to over 450, trumped full of "Sweeteners" which included Tax Breaks, Savings guarantees etc etc. (1)
You will notice however that for the average American Family struggling to pay a mortgage or already on the street eating out of dumpsters or applying for Food Stamps (the number of applicants over the last month has gone up by 1 million (4)) they receive only the following.
"The Treasury Department is authorized to "guarantee" home mortgages, essentially becoming a kind of co-signer, to reduce the number of foreclosures. If the home owner stops paying his or her mortgage, taxpayers would be on the hook (Emphasis mine) . The Treasury Department can also eliminate a "reasonable" amount of a home owner's mortgage debt, under section 109 of the new law, which would likely delay the process of house prices falling."
Now, just think about that for a moment. House prices are falling because..
a) Potential house buyers are losing their jobs hand over fist.
b) Banks are not lending cash to borrowers because they are vastly undercapitalized.
c) The Housing inventory is at an all time high due to foreclosures and unbought houses.
These 3 factors form the Trifecta of the Financial Storm and the Bailout Bill will do virtually nothing to address the fundamentals of the problem.
Firstly, US unemployment ..U.S. jobs fell by 159,000, a decline of 760,000 this year (5) and Corporations like Dell and HP have lain off a huge amount of their workforce and plan to lay off more. American AND European jobs are being outsourced to Asia as we all know. This is due to operating costs but what you rarely hear is the fact that the Bush Administration encouraged this by granting tax breaks to companies who did it (7). If this does not seem part of a well executed plan to impoverish the American people, along with the Sub-Prime loans, the Credit Cards for anyone who could just about spell their name, all under the watchful eye of Federal regulators (i.e. Financial Industry employees) then can someone tell me what would be ? So to conclude US Unemployment is on an accelerating rise and thus the amount of potential buyers is decreasing. Nothing in this bill is designed to halt the unemployment rise or address the issues which helped to create it.
Second. Banks are not lending cash because the covers have been pulled back on their Balance Sheets to reveal exactly what they love to call "Assets". Toxic Mortgage backed Credit default Swaps, overvalued company stock etc etc. But the one catastrophic element that has not been revealed so far is the Derivatives exposure that permeates practically every bank in the World.
Derivatives are defined as..
"In finance, a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage" (2)
The important element to remember here is the fact that the value depends on the Underlying Asset. Derivatives have been running for several years now and are generated by computer programs in Real Time using complex financial algorithms. The estimated volume in the Global Banking system right now is conservatively estimated at 516 TRILLION dollars (6). Yep, that's approx 500 times the value of the possible cost of the Bailout Plan which, in Real terms, would come towards 1.8 trillion plus..see below. (3)
Bailout type | Cost to taxpayers (Source: Reuters) |
Financial bailout package approved this week | up to or more than $700 billion |
Bear Stearns financing | $29 billion |
Fannie Mae and Freddie Mac nationalization | $200 billion |
AIG loan and nationalization | $85 billion |
Federal Housing Administration housing rescue bill | $300 billion |
Mortgage community grants | $4 billion |
JPMorgan Chase repayments | $87 billion |
Loans to banks via Fed's Term Auction Facility | $200 billion+ |
Loans from Depression-era Exchange Stabilization Fund | $50 billion |
Purchases of mortgage securities by Fannie Mae and Freddie Mac | $144 billion |
POSSIBLE TOTAL | $1.8 trillion+ |
NUMBER OF HOUSEHOLDS PER U.S. CENSUS | 105,480,101 |
POSSIBLE COST PER HOUSEHOLD | $17,064+ |
So here we have a time bomb that has to explode that makes the initial cost of bailing out the first phase of Bank write downs seem like small change. When that particular prodigal son comes home, there won't be any Lamb for him .
But, for the moment let's just stay with the Tip of the Iceberg..What will Banks do once the Government has given tax-payer money to prop up their Balance sheet on the credit side or to be more correct, to reduce the size of their true Debit side ?
If they lend that money out to potential house buyers, the number of which has been steadily reducing, they will just be adding to their Debit side as their capitalization will not have increased because they have not generated any real income. So they raise Interest rates on the loan to try and make some profit out of the loan...this automatically starts to put the loan out of reach for the vast majority of Americans.
Third..The intention and supposed purpose of the Bill is to help people in the US keep their homes, revitalize the housing industry, generate credit more easily so that everyone can get back to normal again. Remember it was easy credit combined with destruction of the American Industrial base and suicidally low Fed Interest rates that caused the problem in the first place so where's the upside for Joe Average or Ms Hockey Mom ? There is none because the fundamentals have not changed. Unemployment will keep on rising, house prices will follow market conditions of supply and demand..A Huge inventory already at fire sale prices and a small market can only lead to even further reductions in house prices which, as noted earlier, form the basis of CDO's and Derivatives, thus exposing gigantic cross party risks in the banking world, the truth of which is now well revealed by the meltdown in the banking sector.
Considering the above , is it not reasonable to assume that the intention of the Bailout was just Highway robbery of the American Public ?
There is not one single measure to stimulate real industry, no tax breaks for companies to take jobs back in to the US, no regulation passed to bring in to the open air and Congressional oversight the chicanery, greed for profit and downright irresponsibility of the Banking / Investment Management industry which brought the rest of the world to its knees and has now poised the World on the edge of a cliff, the likes of which, has never been seen since 1929 . But this time the sums involved and the intricate connectivity of the Global Economic model make the consequences truly catastrophic. FDR's New Deal was a brave move to bring a broken country back together again, but FDR is long dead and the current occupants of the White House and the Senate and the House have no intention of replacing Greed with Altruism this time around.
So hold on to your seats, take no notice of what is said on CNN or SKY News, as these are direct beneficiaries of the bailout plan..IF you follow the money (Take a look of who has investments in what company). Research for yourselves and keep your eyes wide open .This is no time to have blinkers on and your future is now 100% in your hands as it should seem really obvious at this stage that Government will never have YOUR interest at heart.
Sources
1 http://news.cnet.com/8301-13578_3-100576
2 http://www.investopedia.com/terms/d/deri
3 http://www.cnbc.com/id/26808715
4 http://www.usatoday.com/news/washington/2
5 http://www.bloomberg.com/apps/news?pid=2
6 http://www.marketwatch.com/news/story/de
7 http://encarta.msn.com/encyclopedia_7017
Thinking back on what has been happening over the last few years, one gets the vivid impression that Government always has a plan and even when it seems that they have lost the plot and are running around like headless chickens, there is a method behind the madness. The Nafta superhighway is already in operation and Mexican freight goes straight in to the US with no hindrance from customs. Ever since Alan Greenspan lowered interest rates to ridiculous levels, which basically created the debt bubble, America has been living on borrowed time. Mounting debt to China was always going to lead to a debt default as the US would never be in a position to pay it back and this was obvious from the start to even the most dim witted politicians and Businessmen. So the introduction of the Amero as the only solution to an engineered event like what is happening right now, would be presented to the world as the only viable option after the Dollar is totally destroyed. How the world will respond to this is very open to question, but the perception of the US as a working model of Capitalism is fast fading even in the view of EUropean and Eastern leaders.
Article below..
The US Secretary of the Treasury has informed the China Development Bank that the US has shipped $800 Billion of a new currency called the Amero, which is to be based upon the merging of the economies of The United States, Mexico and Canada into what is termed as The North American Union.
The current American debt obligation to
Virtually unknown to the American people is that their current leader of the US Department of Treasury, Henry M. Paulson, Jr., has been tasked by President Bush to lead the efforts to join the economies of the US, Canada and Mexico and is also the head of the North American Development Bank, the bi-national financial institution established by the United States and Mexico to further the merging of their economies, and the leader of the Border Environment Cooperation Commission (BECC), the organization created by the governments of the United States and Mexico to further the implementation of the North American Free Trade Agreement (NAFTA).
Here opens the Third Incarnation of my Blog; this time dedicated to intelligent discourse on the huge historic ground shifting events that are currently reshaping the world as we used to know it but which several people have foreseen for years, me included.
In this blog I will be suggesting various ways to safeguard yourself from Economic Oblivion with timely investment of your remaining resources. The important thing to remember is that, even as the House of Cards comes tumbling down, it's still possible to profit on the way down.
We didn't make this mess so I don't have any moral qualms about securing my own future and that of my children.
So, with that in mind, let me know what YOU think is happening right now and let's get the ball rolling as there is not a lot of time left and this is the point to remember; Do not have any illusions that bailing out Banks with Taxpayer money will cure a problem whose enormous mass has only begun to break through the Ice..more on that later.
In this blog I will be suggesting various ways to safeguard yourself from Economic Oblivion with timely investment of your remaining resources. The important thing to remember is that, even as the House of Cards comes tumbling down, it's still possible to profit on the way down.
We didn't make this mess so I don't have any moral qualms about securing my own future and that of my children.
So, with that in mind, let me know what YOU think is happening right now and let's get the ball rolling as there is not a lot of time left and this is the point to remember; Do not have any illusions that bailing out Banks with Taxpayer money will cure a problem whose enormous mass has only begun to break through the Ice..more on that later.
