That is what I wrote to him, and said, hey have a look at this.. I sent it to MISH, who replied back. I sent this to Congress and the Senate. MISH liked my line, "Americans do not negotiate with financial terrorists."
I sent it to the MSM who were spinning it backwards.
We spoke to inlaws tonight, started as a normal phone conversation. Then, we asked if they understood what was happening with the financial situation. They had only listened to MSM.
We told them time to stock up fast, have cash on hand, etc.
And sent them tons of links and vids found here & C2C to get them up to date.
Anonymous Coward User ID: 452238 10/6/2008 2:15 AM
The 1929 depression was manufactured, the big boys made 7 trillion on that one, more on the war that followed. Now, it's not about money, they have enough now, they want the world, minus all of us who just might object.
Roving gangs of cannibals are our future, arm yourselves.
Anonymous Coward User ID: 512301 10/6/2008 2:32 AM
Asia Needs Deal to Prevent Panic Selling of U.S. Debt, Yu Says
By Kevin Hamlin
Sept. 25 (Bloomberg) -- Japan, China and other holders of U.S. government debt must quickly reach an agreement to prevent panic sales leading to a global financial collapse, said Yu Yongding, a former adviser to the Chinese central bank.
"We are in the same boat, we must cooperate,'' Yu said in an interview in Beijing on Sept. 23. ``If there's no selling in a panicked way, then China willingly can continue to provide our financial support by continuing to hold U.S. assets.''
An agreement is needed so that no nation rushes to sell, ``causing a collapse,'' Yu said. Japan is the biggest owner of U.S. Treasury bills, holding $593 billion, and China is second with $519 billion. Asian countries together hold half of the $2.67 trillion total held by foreign nations.
China, Japan, South Korea and others should meet soon to seal a deal, said Yu, a former academic member of the central bank's monetary policy committee. The talks should involve finance ministers, central bank governors and even national leaders, he said.
"Whether some kind of agreement between them to continue to hold Treasury bills is viable, I'm not sure,'' said James McCormack, head of sovereign ratings at Fitch Ratings Ltd in Hong Kong. "It would be unusual. If it became apparent that sovereigns in Asia were selling Treasuries the market would take that quite badly, it's something to be avoided.''
The global credit crisis, triggered by a housing slump in the U.S., has saddled financial companies with more than $520 billion in writedowns and losses, collapsing Bear Stearns Cos. and Lehman Brothers Holdings Inc. in the process. Insurer American International Group Inc. and mortgage giants Fannie Mae and Freddie Mac also were rescued by the government.
`Grave Threats'
U.S. Treasury Secretary Henry Paulson is urging Congress to pass a $700 billion plan to remove devalued assets from the banking system. Federal Reserve Chairman Ben S. Bernanke said Sept. 24 that the U.S. is facing ``grave threats'' to its financial stability.
China's huge holdings of U.S. debt means it must bear a large proportion of the ``burden of sorting things out'' in the U.S., Yu said. China is not in a hurry to dump its U.S. holdings and communication between the two nations every ``couple of days'' is keeping Chinese leaders informed and helping to avoid a potential panic, he added.
"China is very worried about the safety of its assets,'' he said. "If you want China to keep calm, you must ensure China that its assets are safe.''
Currency Manipulator
Yu said China is helping the U.S. ``in a very big way'' and added that it should get something in return. The U.S. should avoid labeling it an unfair trader and a currency manipulator and not politicize other issues, he said.
"It is not fair that we are doing this in good faith and are prepared to bear serious consequences and you are still labeling China this and that, accusing China of this and that,'' he said. "China knows what to do. We don't need your intervention.''
The U.S. financial crisis had taught China a lesson and that was: "Why are we piling up these IOUs if they may default?'' China's economic expansion strategy, which emphasizes export growth that has led to trade surpluses and the accumulation of $1.81 trillion in foreign-exchange reserves, is the main problem, said Yu.
"Our export-growth strategy has run its natural course,'' he said. "We should change course.''
China should stop intervening in the foreign currency markets and thus allow rapid appreciation of the yuan, he said. While this would cause pain for exporters, China could ease the transition by using its strong fiscal position to aid those who lose their jobs. It also should stimulate domestic demand to offset lower income from overseas sales.
Without yuan appreciation, China will continue to accumulate foreign reserves, which means further accumulating "IOUs from the U.S.,'' said Yu. "This is paper and it may default and it will not increase China's national welfare.''
If China doesn't allow the yuan to appreciate and continues to promote export-led growth it will lead to confrontation with the U.S. and Europe, Yu said.
Asia Needs Deal to Prevent Panic Selling of U.S. Debt, Yu Says
By Kevin Hamlin
Sept. 25 (Bloomberg) -- Japan, China and other holders of U.S. government debt must quickly reach an agreement to prevent panic sales leading to a global financial collapse, said Yu Yongding, a former adviser to the Chinese central bank.
"We are in the same boat, we must cooperate,'' Yu said in an interview in Beijing on Sept. 23. ``If there's no selling in a panicked way, then China willingly can continue to provide our financial support by continuing to hold U.S. assets.''
An agreement is needed so that no nation rushes to sell, ``causing a collapse,'' Yu said. Japan is the biggest owner of U.S. Treasury bills, holding $593 billion, and China is second with $519 billion. Asian countries together hold half of the $2.67 trillion total held by foreign nations.
China, Japan, South Korea and others should meet soon to seal a deal, said Yu, a former academic member of the central bank's monetary policy committee. The talks should involve finance ministers, central bank governors and even national leaders, he said.
"Whether some kind of agreement between them to continue to hold Treasury bills is viable, I'm not sure,'' said James McCormack, head of sovereign ratings at Fitch Ratings Ltd in Hong Kong. "It would be unusual. If it became apparent that sovereigns in Asia were selling Treasuries the market would take that quite badly, it's something to be avoided.''
The global credit crisis, triggered by a housing slump in the U.S., has saddled financial companies with more than $520 billion in writedowns and losses, collapsing Bear Stearns Cos. and Lehman Brothers Holdings Inc. in the process. Insurer American International Group Inc. and mortgage giants Fannie Mae and Freddie Mac also were rescued by the government.
`Grave Threats'
U.S. Treasury Secretary Henry Paulson is urging Congress to pass a $700 billion plan to remove devalued assets from the banking system. Federal Reserve Chairman Ben S. Bernanke said Sept. 24 that the U.S. is facing ``grave threats'' to its financial stability.
China's huge holdings of U.S. debt means it must bear a large proportion of the ``burden of sorting things out'' in the U.S., Yu said. China is not in a hurry to dump its U.S. holdings and communication between the two nations every ``couple of days'' is keeping Chinese leaders informed and helping to avoid a potential panic, he added.
"China is very worried about the safety of its assets,'' he said. "If you want China to keep calm, you must ensure China that its assets are safe.''
Currency Manipulator
Yu said China is helping the U.S. ``in a very big way'' and added that it should get something in return. The U.S. should avoid labeling it an unfair trader and a currency manipulator and not politicize other issues, he said.
"It is not fair that we are doing this in good faith and are prepared to bear serious consequences and you are still labeling China this and that, accusing China of this and that,'' he said. "China knows what to do. We don't need your intervention.''
The U.S. financial crisis had taught China a lesson and that was: "Why are we piling up these IOUs if they may default?'' China's economic expansion strategy, which emphasizes export growth that has led to trade surpluses and the accumulation of $1.81 trillion in foreign-exchange reserves, is the main problem, said Yu.
"Our export-growth strategy has run its natural course,'' he said. "We should change course.''
China should stop intervening in the foreign currency markets and thus allow rapid appreciation of the yuan, he said. While this would cause pain for exporters, China could ease the transition by using its strong fiscal position to aid those who lose their jobs. It also should stimulate domestic demand to offset lower income from overseas sales.
Without yuan appreciation, China will continue to accumulate foreign reserves, which means further accumulating "IOUs from the U.S.,'' said Yu. "This is paper and it may default and it will not increase China's national welfare.''
If China doesn't allow the yuan to appreciate and continues to promote export-led growth it will lead to confrontation with the U.S. and Europe, Yu said.
We now find out that the 700 billion bailout will be paid to foreigners, primarily China. You know China the people your government borrowed money from to give you a stimulus check!
Paulson to Name Kashkari to Oversee Bailout, WSJ Says
By Shamim Adam and Steven McPherson
Oct. 6 (Bloomberg) -- Treasury Secretary Henry Paulson is expected to name Neel Kashkari to oversee the U.S. government's $700 billion financial stabilization program, the Wall Street Journal reported, citing people familiar with the matter.
As assistant secretary for international economics and development at the Treasury, Kashkari is a senior adviser to Paulson and counsels him on key policy matters, according to the department's Web site. The decision for Kashkari, 35, to run the new department known as the Office of Financial Stability, may be announced as early as today, the newspaper said.
[link to www.bloomberg.com]
Indian Amercian gets plum post in US govt
Aziz Haniffa in Washington,DC | July 18, 2008
Neel Kashkari, who was the Senior Advisor to US Treasury Secretary Henry M Paulson, was nominated by President Bush to the post of Assistant Secretary of Treasury for International Affairs and has been confirmed by the US Senate.
He will be one of the senior most Indian Americans in the Bush Administration. His tenure will last for six months.
The Akron, Ohio-born Kashkari, told rediff.com that in the next few months he would zero in "on a number of initiatives critical to ensuring US and global economic strength," and that his responsibilities would "include managing issues related to foreign investment in the United States, as well as overseeing regionally-focused international affairs priorities."
"I look forward to reaffirming America's commitment to open investment - which stimulates growth, creates jobs, enhances productivity and improves competitiveness," he said.
Kashkari said, Specifically related to India, there were five areas which he would push for "that the Treasury Department sees as significant opportunities for both countries - promoting infrastructure investment, increasing financial sector liberalisation, supporting a bilateral investment framework, investing in clean technology, and supporting multilateral trade."
Sources told rediff.com, that in the discussions between senior US and Indian officials that have been underway on the possibility of negotiating a bilateral investment treaty between the two countries, Kashkari had been among the leading American negotiators.
However, these sources acknowledged that the chances of such a treaty "getting past first phase, let along being signed in the final months of this Administration is highly unlikely - it just won't happen."
"But at least the spadework is being done and the seeds have been planted and the template would have been put in place, if the new administration wants to run with it," the source added.
Kashkari - whose parents, father Chaman, a retired professor of engineering and mother, Sheila, a pathologist, hail from Kashmir- prior to joining Treasury, was a vice president at Goldman Sachs and Co. in San Francisco, where he led the firm's IT security investment banking practice, advising public and private companies on mergers and acquisitions and financial transactions.
Before his career in finance, Kashkari was a R&D Principal Investigator at TRW in Redondo Beach, California, where he developed technology for NASA space science missions such as James Webb Space Telescope, the replacement for Hubble, which is scheduled for launch in 2013.
He is an alumnus of the University of Illinois at Urbana-Champaign, from where he received his bachelor's and master's degree in aerospace engineering, and the University of Pennsylvania's Wharton School of Business from where he received his MBA in finance.
When he appeared before the Senate Committee on Banking, Housing and Urban Affairs, chaired by Senator Chris Dodd, Connecticut Democrat, for his confirmation hearing, Kashkari said that since joining the Treasury Department in July 2006, he had led several policy initiatives for the Department, including "promoting Indian financial sector liberalisation and free trade through strengthened economic engagement and increased infrastructure investment."
He said that in his role as Senior Advisor to Paulson, he had "been responsible for developing and executing international and domestic policies for the Department to foster a more conducive investment climate for the US as well as the support of global economic growth."
Kashkari said that his stint in the private sector as an investment banker before joining government where he had "executed financial and strategic transactions," had prepared him for the position to which he had been nominated by President Bush.
He said advising US and international companies "on both debt and equity financing, global mergers and acquisitions," and by virtue of coaching management teams and boards of directors, "I gained first-hand insight into the challenges that US companies face as they strive to access markets abroad, while also competing with global players here at home."
"This transactional experience will be particularly relevant to helping implement our critically important security policy through the Committee on Foreign Investment in the United States," he added, and pledged to "work hard to ensure that US national security is protected, while encouraging foreign investment in the US."
Kashkari said that besides leading several policy initiatives for the Department, including the India initiative, he had also been involved in "enhancing US energy security by implementing policies that will over time, reduce our exposure to the global oil market by encouraging the development of alternative fuels and by improving the efficiency of our auto fleet."
[link to www.rediff.com]
Neel Kashkari is Senior Advisor to U.S. Treasury Secretary Henry M. Paulson, Jr. He provides counsel to the Secretary on key policy matters.
Prior to joining the Treasury Department, Mr. Kashkari was a Vice President at Goldman, Sachs & Co. in San Francisco, where he led Goldman's IT Security Investment Banking practice, advising public and private companies on mergers and acquisitions and financial transactions. Prior to his career in finance, Mr. Kashkari was a R&D Principal Investigator at TRW in Redondo Beach, California where he developed technology for NASA space science missions such as the James Webb Space Telescope.
Originally from Stow, Ohio, Mr. Kashkari graduated from the University of Illinois at Urbana-Champaign with a Bachelor’s and Master's degree in Engineering. He also received an M.B.A. in Finance from the Wharton School. Mr. Kashkari and his wife Minal maintain residences in Maryland and California.
[link to www.treas.gov]
Anonymous Coward User ID: 513288 10/6/2008 4:58 AM
How China could wreck the US economy
M R Venkatesh
October 06, 2008
The recent bailout package being approved in the US Congress needs to be viewed in the context of the spurt in the accumulation of forex reserves of China by about $500 billion in the last six months to about $2 trillion in aggregate.
This gargantuan build-up of forex reserves by China has strangely received very little attention of economists, policy analysts, currency traders and, of course, geo-strategists around the world.
Why is China engaged in this exercise? What could be its implications on the on going global financial crisis? Could China trip the bailout package announced by the US last week? Crucially what are the implications for the existing global order?
What is intriguing in the Chinese forex reserve build-up is that both trade surplus and foreign direct investment account only for a part of this gargantuan pile. After adjusting for all known sources of reserve accretion, experts conclude that approximately an excess of $200 billion could have flown into China as 'hot money' -- read inexplicable flow of funds -- in this period.
The Economist -- in one of its issue in recent months -- quotes Michael Pettis, an economist working in China, who explains how and why hot money flows into China. According to Pettis, hot money comes into China when companies overstate FDI and over-invoice exports.
But where is such money getting parked in China? The Chinese stock market, like many of its counter parts across the globe, continues to plunge. Hence, it may not be an attractive destination for hot money. Some experts suggest that it could have gone into property while the predominant view is that it could simply be the Chinese banks that offer interest rates in excess of 4 per cent on yuan deposits compared with a lower rate on dollars.
How a 2 per cent interest rate differential results in such cross-border flow of capital requires some explanation. What makes the dollar-yuan exchange rates central to any discussion on global finance is the fact that trade between the United States and China has burgeoned in the past decade or so. But this is not a two-way trade as would be commonly believed. Most of this is unilateral -- i.e. exports from China to the US.
In fact, this is the fundamental reason for the burgeoning current account surplus that in turn translates into China's forex reserves. In the process, over the years, the US has become extremely dependent on China not only for supplying cheap goods but also for the Chinese to fund such imports by parking their forex surplus within the US.
This twin-dependency on the Chinese for goods and money to finance its deficits has always engaged the attention of the US policy framers who till recently were not at all comfortable with this arrangement. And now added to this is the latest aggressive build-up of forex reserves by China surely has the Americans in a bind.
The economics behind Chinese yuan
Economists in the US till recently believed that a weak yuan implicitly subsidises the Chinese exports leading to such huge trade imbalances between the two countries. Consequently, they have been pointing out to the imperative need for a substantial appreciation of the yuan by a minimum of 20-25 per cent vis-a-vis the US dollar to remedy the situation. In the alternative they have suggested a countervailing duty of a similar scale on imports from China.
Further, economists are of the opinion that by constant intervention in the forex market not only does the Chinese Central Bank ensure a weak yuan it also causes competitive devaluation of various currencies in Asia.
The net consequence is a domino effect with the result that the US dollar is artificially valued at higher-level vis-a-vis most Asian currencies. Experts believe that a significant yuan revaluation will ensure a more realistic exchange rate mechanism in Asia as it could force other countries to follow suit.
It is in this connection that C Fred Bergsten of the Peterson Institute, in a testimony before the hearing on the Treasury Department's Report to Congress on International Economic and Exchange Rate Policy in early 2007, states: "By keeping its own currency undervalued, China has also deterred a number of other Asian countries from letting their currencies rise very much against the for fear of losing competitive position against China."
Naturally, in anticipation of a significant revaluation of the yuan, most experts believe given the uncertainty associated with the global financial markets that hot money is flowing to a relatively safe destination. After all, China not only offers higher return but also is virtually insured against any downward movement against the US dollar.
In effect, is this hot money flowing into China in anticipation of this revaluation of the yuan? Or is it a simple case of China maintaining trade competitiveness through a weak yuan? Or is there something more to it than meets the eye? Are the Chinese acquiring the dollars with some sinister motive? In effect, has the Chinese strategy of a weak currency over the years the un-stated policy of dynamiting the American economy?
Mutually Assured Destruction (MAD)
What is worrying the Americans is that China accounts for about one-fourth of the global forex surpluses and are the counterparts of the US current account deficit. Put simply, while China accumulates forex reserves, the US accumulates a corresponding debt. And the Americans are aware that it is the Chinese are the biggest accumulators of the US treasury bonds.
What is indeed intriguing is that a country -- the US -- that prides on being 'independent' of other countries, especially in security affairs, is now caught in a quagmire as it has to be constantly in the good books of the Chinese government if it wants to avoid a sudden shock.
Countries that hold large US dollar denominated forex reserves have a powerful tool in their arsenal -- they could wreck American financial markets at a mere click of a mouse by selling their dollar holdings. Imagine China with a holding nearly $2 trillion worth of treasury bonds seceding to sell the same overnight.
And that could instantaneously dynamite the global financial system as it could suck out liquidity and cause interest rates to shoot through the roof. Remember, the $700 billion package announced last week by the US is precisely aimed at addressing the liquidity crunch within the US.
China, of course, might have no sinister intent, as this would be at a huge cost. But the Chinese know that no country can ever become a global superpower without a cost. As and when the Chinese decide to take a hit on their dollar holdings, global finance could indeed take a roller coaster ride.
Obviously, the Americans' borrowing from China and the Chinese supply of money to the US is indeed an intriguing geo-political game. Surely, this cannot be simple economics by any stretch of imagination.
Given this paradigm, till date experts opine that both are locked in a tight bear hug. According to Lawrence Summers, 'It is a new form of mutually assured destruction that has quietly emerged over the last few years. This implies that China needs the US (for its exports and to park its forex reserves) as much as the US needs China (for imports and borrowings).
So have the Americans played into the hands of Chinese?
Recent events in the US have turned this 'MAD paradigm' upside down. It is in this context that the recent bailout package needs to be viewed, which seeks to increase liquidity over a period of time by the US government taking over sub-prime assets from financial institutions. That, according to the American thinking, is expected to provide liquidity to the US economy.
But it is all these happenings within the US that makes this accumulation of forex reserves by China extremely interesting. It may be noted that the Chinese, unlike the others, have always questioned the global order with the US at the helm of affairs. And the Chinese accumulation of forex reserves is surely a strategy that perhaps has an ominous side to it.
All this is not pure economics as it is made out to be. Rather, it was and remains a well-planned economic, political and military strategy of the Chinese. And in a way it is the mirror image of the Star Wars programme that the then US President Reagan unleashed on the erstwhile USSR in the early eighties that eventually bankrupted the later within a few years as it engaged in competitive arms build-up with the former.
Statecraft is all about engaging other countries at one's own terms, pace, time and cost. This is what the US did to the USSR in the eighties and succeeded in dynamiting that country. And that is what China could do to a vulnerable US in the coming months. Crucially, if it doesn't, from the Chinese perspective it might well rue this moment forever.
The US till date was depending on the Chinese for imports and to finance them as well for such imports. Now they will have to be considerably dependent on the Chinese to protect their currency as well as to ensure liquidity in their money markets. And that completely alters the existing global order.
1 Chinese yuan = Rs 6.9160
1 US dollar = yuan 6.8527
The author is a Chennai-based chartered accountant. He can be contacted at mrv1000@rediffmail.com.
Margareta Pagano: Will China tip the US 'balance of financial terror'?
Sunday, 5 October 2008
The former US Treasury Secretary, Larry Summers, calls it the "the balance of financial terror". A noted academic, Summers, who served under President Bill Clinton, was referring to the relationship between the US and its newer creditors, such as China, the Middle East and Russia. Foreign countries now own nearly a quarter, some $2.6 trillion, of the total US debt. They also own more than $14 trillion in US assets – that's more than the total US national output.
By far the biggest chunk of this debt is still owned by the Japanese, with US Treasuries worth $593.4bn. But soaring up the debt table is China, which now controls $518.7bn, more than 8 per cent higher over the past year, and equal to about half of the total $1.2 trillion it holds in reserve assets. Oil-rich states are also snapping up T-bills as though they are going out of fashion – up 29 per cent on the year to $173bn. On top of this, the US has a trade deficit with China in the first six months of this year of $142bn – and it is still growing.
Behind all the figures lurks some intriguing realpolitik. The success of the US rescue package depends as much on the support of China and the Middle East as it does on the American taxpayer. Ultimately, it is the Chinese and Middle Eastern governments – and their taxpayers, which will decide the fate of the biggest financial rescue plan in history. Indeed, one of the reasons the US authorities say they had to rescue Fannie Mae and Freddie Mac was to reassure the Chinese government that US securities really were secure.
They are going to have to do so again for this latest bail-out. Apparently one of the first things Hank Paulson, the US Treasury Secretary, plans now the package has gone through is a "road show" in Beijing to explain the rescue and why the US is not going to explode. As the ex-chairman of Goldman Sachs, Paulson has had good relations with China – visiting the country more than 70 times, chairing Tsinghua University's business school and helping the former Chinese president save an area of outstanding environmental importance.
But Paulson will need to do more than go down on one knee to persuade the more sceptical Chinese – and there are many – that this rescue will work. There are some signs that the Chinese are being co-operative, and this may explain why the dollar has been strengthening during this recent crisis despite such low interest rates.
If they decide not to buy any more of the new debt, or dump existing debt, then the outlook for the US is truly dire. Interest rates will have to be pushed up again to attract new investors. It is a zero sum game: if the foreign holders do pull out then they would only be hurting their own investments.
We've known for some time that the growth of the emerging economies such as Russia, China and India through globalisation would eventually dilute the power of the US. Philosopher John Gray thinks American political leaders are oblivious to what is really going on. He believes the present crisis is pushing the US into a fall as catastrophic and swift as that of the Soviet Union when the Berlin Wall came down. It's far too early to say if he is right, but what will be really interesting to watch is China's response to this crisis. Will it assert its authority or continue as a peaceful trade partner: the balance of financial terror exchanging debt for toys?
We do live in interesting times.
He's back Man with a mission to save Labour in the City
Expect fireworks: Peter Mandelson is back. Whatever you think of the Prince of Darkness, there's no doubt he's a class act when it comes to talking the talk with the money men. That's why Gordon Brown has eaten humble pie, appointing him to what is looking like one of the most powerful, albeit unelected, positions in the land. Brown needs Mandelson's formidable network of business contacts to help him out of the financial crisis – and to win back the business community which has fallen out of love with Labour. Mandy moves fast – he's brought Sir John Bond, ex-boss of HSBC, Mervyn Davies of Standard Chartered and Lord Browne on board as ambassadors. But it's the young Tory shadow Treasury team that I feel for – even Alistair Darling should be nervous. It may be Tony Blair will be proved right: he once said that his job at Labour would be done when the party learned to love Mandelson.
Can Mervyn and Mandy get small businesses back on the road?
Peter Mandelson may be close to big businessmen but it's the smaller ones he now needs to win over. One of the new Business Secretary's biggest challenges is to help those firms that are running out of credit. More important, though, will be to find ways of helping new ones to start up.
He's going to work closely with Shriti Vadera, the minister at the Department for Business, Enterprise & Regulatory Reform, who has been given a place at the top table of the new Economic Council with a special role for promoting small companies.
This is vital. Only last week Barclays, one of the biggest lenders to small firms, said the number of business closures is up by 10 per cent while start-ups are down by the same amount. That is bad news both for the entrepreneurs and the would-be apprentices.
They are being attacked on all fronts. The big four high-street banks are penalising them with overdraft charges of up to 15 per cent. Others are starting to force customers to turn overdrafts into loans. Unfortunately, the big four operate a cosy cartel as between them they control about 90 per cent of all small business banking.
There is no evidence so far that the banks are refusing loans. But the Federation of Small Businesses is deeply worried that if the turmoil continues, they will return to the bad habits of the late 1990s – turning down new loans or stopping small firms from growing by switching off lending.
Hopefully, the switch in tactics by the Bank of England's Mervyn King last week should help ungum the wholesale lending market. By allowing banks to extend their collateral to securities made up of corporate and consumer loans, as well as mortgages, liquidity should now start to improve. This should make it much easier for the banks to borrow from the Bank as they are finding it impossible to lend to each other. Between them Mervyn and Mandy can perhaps get the wheels moving again.
Financial blogger, Mish Shedlock, points out that Treasury Secretary Paulson’s plan actually extends to foreign investors. Yes, you read that right. Not to foreign banks headquartered in the US, but to foreign investors. Bad debt (sorry, troubled assets) can move from the foreign branch of a bank to its US branch. Bingo — what’s Mandarin for bingo? — you, the American taxpayer, are on the hook.
None of this should really be surprising. During his time at Goldman Sachs, Paulson made millions of dollars for his firm in China, with commensurate rewards for himself.
In 2006, Goldman Sachs bought into China’s largest bank, the Industrial and Commercial Bank of China, for $2.58, one of a number of such deals cut with Chinese state entities, as neoconservative hawks were quick to note. According to knowledgeable people, its profit of $3.9 billion was the biggest ever for the firm since its founding in 1869.
Goldman also bought a stake in Tokyo’s Sumitomo Mitsui Financial Group, the third largest financial group in Japan in 2003 ($1.26 billion), in return for which, Sumitomo Mitsui loaned billions to Goldman Sachs for its investment-grade clients. Both that and the ICBC deal were financed with Goldman’s own money and with investments by its partners, institutions and wealthy clients.
What’s more, Goldman earned more fees than any other of its global competitors in China, being the only foreign securities firm allowed to both trade stocks for brokerage clients and arrange share sales for companies. (Wonder why Paulson acts so high-handedly? Goldman is notorious for such conflicts.)
Knowing that Goldman is the source of a bunch of the credit default swaps now clogging up global finances, we can safely surmise that its Asian clients are now suffering the same toxic shock afflicting its American and European clients.
A Wall Street legend for paranoia and secrecy, The Firm didn’t let on for a while how badly it too had been hit. That front fell apart this fall when its stock price swooned, along with those of other financial firms. Recently, the New York Times reported exactly how much Goldman stood to lose from contracts with insurance giant, AIG. If AIG had gone under, Goldman would have lost $20 billion.
The Times also reported, apparently as revelation, that Lloyd Blankfein, current CEO of Goldman, attended weekend meetings with AIG, Paulson, and others before the AIG rescue was put through. (Amazing. Powerful corrupt financiers cut backroom deals with each other and twist arms in powerful corrupt DC. Who would have thought? Of course, in the alternative press we were aware of Goldman’s less than Boy Scout past much before the Times lost its innocence, but better late than never.)
Now we can guess why it was necessary to convert Goldman so quickly into a commercial bank. With access to customer deposits, the bank would be able to replenish its capital in short order.
Does Paulson profit personally? Reportedly, he sold his own shares in Goldman before being sworn in as Treasury Secretary in June 2006. Still, the meetings between Blankfein, AIG, Treasury, and the Federal Reserve sound like the worst kind of cronyism, given AIG’s subsequent rescue. And they’re not the only problem.
1) The amendment of reserve requirements (in Section 128, in both the original and amended versions of the Paulson plan) is another:
Section 203 of the Financial Services Regulatory Relief Act of 2006 (12 U.S.C. 461 note) is amended by striking ‘October 1, 2011’ and inserting ‘October 1, 2008.’
As Pam Martens points out, this amendment would allow banks to hold zero reserves for transactions, a very enticing prospect for an investment bank in such dire need of capital it had to reinvent itself as a deposit-taking retail bank. And this would go through before the election, before the political scene was altered drastically.
2) The bailout of the financial sector, especially Goldman Sachs, is now a matter of keen interest to a large number of wealthy and influential foreigners — both individuals and private and state-run banks. Paulson’s long-standing ties with these foreign entities, as well as with leading financial entities all over the world, in and of itself constitutes a powerful conflict-of-interest and opens up the question of foreign influence on one of the most powerful offices in our government. (For instance, since June 2006, more than 100 ICBC executives have attended courses at Goldman’s New York training center, where tutors include Gerald Corrigan, former president of the Federal Reserve Bank of New York, who teaches a course on risk management (of all things). ICBC’s board includes Christopher Cole, Goldman’s chairman of investment banking. One of its directors is former Goldman President John Thornton.)
When the American state has interests it declares at odds with those of the Chinese state in a number of areas, for example in Africa (where Goldman has a 20% stake in Africa’s largest bank, Standard Bank); when servicemen and women are fighting and dying, ostensibly to protect those interests; when we are threatening other countries with bombing in defense of those interests; shouldn’t the appearance of foreign entities influencing the Treasury Secretary and Federal Reserve policy be treated seriously and transparently?
3) If Goldman went down, ICBC would be severely hit. And so would ICBC’s clients and other investors in ICBC. But it looks like Mr. Paulson would take a big loss too. According to press reports, Mr. Paulson netted a stake reported to be $25 million in the ICBC deal, a stake he and Goldman, as well as investors in Goldman’s private equity funds, are prohibited from selling for three years. A hit to Goldman would hit ICBC (and who knows what else). And a hit to ICBC would hit Paulson’s pocket.
Did Mr. Paulson sell this ICBC stake before he took office or didn’t he? It would be in the national interest to require him to make a public disclosure before this bill is passed.
And then he should resign.
Anonymous Coward User ID: 254160 10/6/2008 7:20 AM
Ex-military intelligence officer says 596 Trillon derivatives market getting ready to explode. This guy says the 700 billion bailout is a 10 cent solution to a $1000 problem. Bank holiday coming this week. Worldwide economic shutdown within 24 hours afterwords. All credit cards frozen, all ATM machines shutdown, etc.
Its all planned!!! MacKinders World: Financial Collapse and World War III
By Francis P. Sempa
Halford Mackinder’s ideas, which began to appear in print almost a century ago, have assumed classic status in the world of political geography. Policy makers and scholars remember them now mainly for the seemingly simple formula that control of Eastern Europe would bring command of the “Heartland,” thus control of the “World-Island” (Eurasia), and ultimately the world. His ideas in their entirety, including his own later reconsiderations, form a complex, powerful body of work. The author, who is deputy attorney general for the Commonwealth of Pennsylvania, revisits Mackinder’s professional career. ~ Ed.
The study of international relations is impossible without a firm grasp of geography. The geographic factor in world history is the most fundamental because it is the most constant. Populations increase and decrease, natural resources are discovered and expended, political systems frequently change, empires and states rise and fall, technologies decline and advance, but the location of continents, islands, seas and oceans has not changed significantly throughout recorded history. That is why great nations neglect the study of geography at their peril.
No one understood better the important relationship between geography and world history than the great British geographer, Halford John Mackinder. Born in Gainsborough, England, in 1861, Mackinder attended Gainsborough Grammar School and Epsom College before entering Oxford in 1880. As a boy, according to W. H. Parker, Mackinder had “a strong curiosity about natural phenomena, … a love of the history of travel and exploration, an interest in international affairs, and a passion for making maps.”1
At Oxford, Mackinder fell under the influence of Michael Sadler and Henry Nottidge Mosely, key figures in the effort to establish geography as an independent field of study in England. Mackinder was appointed a lecturer in natural science and economic history in 1886 and that same year joined the Royal Geographical Society. According to Brian W. Blouet, one of Mackinder’s biographers, the membership of the Royal Geographical Society “consisted of men with a general interest in the world and its affairs, officers from the army and navy, businessmen, academics, schoolteachers, diplomats, and colonial administrators.”2 The next year (1887), Mackinder wrote his first major paper, “On the Scope and Methods of Geography,” which has been called “a classic document in the history of the development of British geography.”3 In that paper, Mackinder argued that “rational” political geography was “built upon and subsequent to physical geography.” “Everywhere,” he wrote, “political questions will depend on the results of the physical inquiry.” Political geography’s function was “to trace the interaction between man and his environment.” That environment, Mackinder explained, included the “configuration of the earth’s surface,” climate and weather conditions, and the presence or absence of natural resources.4
Four of the ideas mentioned in “On the Scope and Methods of Geography” are key to understanding Mackinder’s subsequent geopolitical writings.
First, Mackinder expressed his view that the goal of a geographer was to “look at the past [so] that he may interpret the present.”
Second, he noted that man’s great geographical discoveries were nearing an end; there were very few “blanks remaining on our maps.”
Third, Mackinder described the two kinds of political conquerors as “land-wolves and sea-wolves.”
And, fourth, he recognized that technological improvements made possible “the great size of modern states.”5
Upon the foundation of those four ideas Mackinder later constructed his famous global theory.
In June 1887, Mackinder was appointed Reader in Geography at Oxford, and he began to lecture on the influence of geography on European history. He visited the United States in 1892, lecturing at the University of Pennsylvania, Swarthmore, Drexel, Harvard, Princeton and Johns Hopkins. The same year, he was appointed Principal of Reading College at Oxford, a position he held for eleven years. In 1893-1894, Mackinder gave a series of ten lectures on the relations of geography to history in Europe and Asia. Five years later, he helped found the School of Geography at Oxford, and participated in an expedition that climbed Mount Kenya, Africa’s second-highest peak.6
In 1902, Mackinder wrote his first major book, Britain and the British Seas. Although primarily concerned, in Mackinder’s words, “to present a picture of the physical features and conditions” of Britain, the book’s chapters on “The Position of Britain,” “Strategic Geography,” and “Imperial Britain” contain insights on global affairs that foreshadowed Mackinder’s subsequent geopolitical works. In the book, he described Britain as being “of Europe, yet not in Europe,” and as lying “off the shores of the great continent.” British predominance in the world rested on its “command of the sea,” wrote Mackinder, because “[t]he unity of the ocean is the simple physical fact underlying the dominant value of sea-power in the modern globe-wide world.” “A new balance of power is being evolved,” Mackinder opined, and it included “five great world states, Britain, France, Germany, Russia, and America.” Mackinder suggested, however, that Britain’s position as the preeminent world power was endangered due to “permanent facts of physical geography” in the form of “the presence of vast Powers, broad-based on the resources of half continents” (i.e., Russia and the United States).7
The threat to British preeminence and to the liberty of the world was the subject of Mackinder’s bold, provocative essay, “The Geographical Pivot of History,” which he delivered to the Royal Geographical Society on January 25, 1904. He began this seminal work by noting that the last stage of “geographical exploration” (which he called the “Columbian epoch”) was nearing its end. “In 400 years,” he wrote, “the outline of the map of the world has been completed with approximate accuracy.” Moreover, since conquerors, missionaries, miners, farmers and engineers “followed so closely in the travelers’ footsteps,” the world was for the first time a “closed political system.” This meant, wrote Mackinder, that “every explosion of social forces, instead of being dissipated in a surrounding circuit of unknown space and barbaric chaos, will be sharply re-echoed from the far side of the globe, and weak elements in the political and economic organism of the world will be shattered in consequence.” Nations, in other words, could no longer safely ignore major events that occurred in far away places of the globe.
Mackinder’s avowed purposes in writing the “pivot” paper were to establish “a correlation between the larger geographical and the larger historical generalizations,” to provide “a formula which shall express certain aspects… of geographical causation in universal history,” and to set “into perspective some of the competing forces in current international politics.”
Mackinder pictured Europe and Asia as one great continent: “Euro-Asia.” He described Euro-Asia as: “a continuous land, ice-girt in the north, water-girt elsewhere, measuring twenty-one million square miles….” The center and north of Euro-Asia, he pointed out, measure “some nine million square miles, … have no available waterways to the ocean, but, on the other hand, … are generally favorable to the mobility of horsemen…. ” To the “east and south of this heart-land,” he further explained, “are marginal regions, ranged in a vast crescent, accessible to shipmen.”
Mackinder noted that between the fifth and sixteenth centuries, a “succession of … nomadic peoples” (Huns, Avars, Bulgarians, Magyars, Khazars, Patzinaks, Cumans, Mongols and Kalmuks) emerged from Central Asia to conquer or threaten the states and peoples located in the “marginal crescent” (Europe, the Middle East, southwest Asia, China, southeast Asia, Korea and Japan). Beginning in the late fifteenth century, however, the “great mariners of the Columbian generation” used seapower to envelop Central Asia. “The broad political effect” of the rise of sea powers, explained Mackinder, “was to reverse the relations of Europe and Asia….” “[W]hereas in the Middle Ages Europe was caged between an impassable desert to south, an unknown ocean to west, and icy or forested wastes to north and north-east, and in the east and south-east was constantly threatened by the superior mobility of the horsemen,” Mackinder further explained, “she now emerged upon the world, multiplying more than thirty-fold the sea surface and coastal lands to which she had access, and wrapping her influence around the Euro-Asiatic land-power which had hitherto threatened her very existence.”
Often unappreciated, however, Mackinder believed, was the fact that while Europe expanded overseas, the Russian state based in Eastern Europe and Central Asia expanded to the south and east, organizing a vast space of great human and natural resources. That vast space would soon be “covered with a network of railways,” thereby greatly enhancing the mobility and strategic reach of land power.
With that geo-historical background, Mackinder identified the northern-central core of Euro-Asia as the “pivot region” or “pivot state” of world politics. He placed Germany, Austria, Turkey, India and China, lands immediately adjacent to the pivot region, in an “inner crescent,” and the insular nations of Britain, South Africa, Australia, the United States, Canada and Japan in an “outer crescent.” He then warned that, “[t]he oversetting of the balance of power in favour of the pivot state, resulting in its expansion over the marginal lands of Euro-Asia, would permit the use of vast continental resources for fleet-building, and the empire of the world would then be in sight.” Mackinder suggested that either a Russo-German alliance or a Sino-Japanese empire (which conquered Russian territory) could contend for world hegemony. In either case, “oceanic frontage” would be added to “the resources of the great continent,” thereby creating the geopolitical conditions necessary for producing a great power that was supreme both on land and at sea.
“I have spoken as a geographer,” Mackinder acknowledged toward the end of the paper. But he carefully avoided geographical determinism in assessing the world situation: “The actual balance of political power at any given time is… the product, on the one hand, of geographical conditions, both economic and strategic, and, on the other hand, of the relative number, virility, equipment and organization of the competing peoples.”8
It is stated that one mans garbage is another mans treasure. I submit to you that the same can be said for information or knowledge. What is truth and religion to one man is a conpsiracy to another; and to another, that information could be utter nonsense.
*******************
Yeah, that's right- I've already broken out the Christmas decor!
Anonymous Coward User ID: 515438 (OP) 10/6/2008 2:01 PM
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