| | | Page 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28 | Watch, Its happening ,the global economic change.
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User ID: 539413
11/1/2008 12:41 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
War Of Attrition
James West
www.MidasLetter.com
October 29, 2008
The spot price of gold as quoted by NYMEX is no longer an accurate representation of the real price at which physical gold bullion is being traded. It is, in fact, a lie.
This is apparent by the great disparity between the availability of gold and the virtual shutting down of all sales operations related to delivery of anything denominated in one ounce units. Buffalos, Krugerrands, Eagles….you name it, you can’t buy ‘em.
The idea of “Futures” was originally established as a mechanism for price discovery, not price determination. Yet this very mechanism, first deployed as way for bankers to capitalize farmers in the spring with a relative degree of certainty as to what the farmer would reap in the fall, has become a tool for the manipulation of the gold market. In creating such huge short positions in the futures market, and driving the price down, the spot price suffers as a result of the physical short created to hedge against a paper long.
It is an elementary simplification to state that a thing is worth what somebody is willing to pay for it.
The fact that bullion dealers are paying and charging premiums to the spot price for gold is clear evidence that the spot price published each day is no longer an accurate representation of the price of gold, and its continuing publication as such must soon be identified as fraudulent, and corrected.
The likelihood of that happening, however, is contingent upon the admission by various U.S. government entities that they have participated in the suppression of the gold price, and that is simply not likely to happen in this lifetime. Just as front line MP’s and soldiers were court-martialed for the excesses of violence perpetrated on detainees from Iraq and Afghanistan, heads will likely roll in theatrical fashion to satisfy a media-moderated demand for blood.
The danger here is that we have several new bubbles building, and the massive inflation of currencies worldwide now underway, while acting temporarily to stave off the inevitable explosive correction, is steadily adding pressure to the chamber in which this monetary ordinance is being compressed. When the price of gold does finally erupt as the massive currency devaluation going on outside of the United States Dollar causes panic selling, the damage will again be amplified exponentially because of disingenuous misinformation distribution.
Interestingly, the campaign to undermine the global perception of gold is achieving a certain success. Even hard core gold bugs are capitulating and abandoning their heretofore staunchly defended arguments that, in essence, said, “when the crash comes gold will take off”, which at this point hasn’t happened. So now even gold bugs, to some degree, are abandoning their posts.
It is at this point in a war of attrition that men are separated from boys, those who fight with the courage of their convictions from those who follow the (albeit) contrarian herd, and battles are historically won against great odds.
In pursuing the development of a feature length documentary film that seeks to expose the pattern of fraud and deceit that has emerged in the fiscal and monetary policy of the last hundred years, many, including some who have traditionally written in support of such a position, have suggested that this is a David and Goliath match-up of biblical proportions that has a feint hope of success.
Obviously, all the goldbugs and GATA supporters and writers and analysts and traders and bloggers combined could not finance any sort of information campaign comparable to the mighty mainstream media division of the G7 perception management machine.
But to capitulate at this point, to accede defeat and abandon the barricades as it were, is either short-sighted or revealing of an absence of deep conviction in the first place.
This is the desired outcome of the global banking cartel’s campaign. In a brilliant emulation of Orwellian logic, the availability of gold has been increased from “as much as you’d care to buy” to “you can’t buy any”! And in the absence of such supply, the price has increased from $1,000 per ounce plus, to under $750.
Tokyo Rose would be hysterical with glee at such a coup of propaganda! Whole legions of otherwise sensible people are accepting the logic as distributed from the ivory towers, and hoarding US Dollars of all things, and abandoning the idea of gold as the historical store and measure of value. This is simply astounding!
People think the United States government is rushing to their defense with all these bailouts and stimulus packages. They refuse to see what is clearly the repetition of a pattern perfected during financial crises of the last century. The cherry-picking of the top assets in banking in tandem with the elimination of the competition for pennies on the dollar should be enshrined in a national festival, it’s so predictable. We could call it “Fleece the Sheep” week, or something.
Unfortunately, the period of asset re-allocation and concentration lasts more than a week…typically it’s a few years until the booty is divvied up and the system re-saturated with cheap money for another round of global asset piñata-bashing.
You can hold onto your U.S. dollars if you want to, though it is unlikely that those who can see the truth behind what is unfolding in front of our very eyes will change their tune just because it is increasingly fashionable to do so. Gold will emerge as the asset class and currency of the patient and visionary. |
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User ID: 539413
11/1/2008 12:46 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Where do people put their savings? Why, in the banks, of course.
The problem is that bankers have lost their way. I do not think they are such a wretched lot as many would think. They are ordinary business people who want to get rich, something most people want but cannot attain.
There is a lot of power associated with being a banker, because you have the savings of thousands - perhaps millions – at your disposal. With power comes arrogance. Arrogance opens the door to greed. Greed opens the door to advisers who will find ways to make the banker rich, richer, always richer. How? By cutting corners.
There are in banking certain rules, tried and tested rules, which allow a Bank to endure in business. But these rules obstruct the banker that wants to get rich as fast as possible and then to get even richer.
A good banker lends out Savings. But savings take a long time to accumulate. So, how can the banker make things go faster, how can he make a fortune quickly? The advisers, the “economists” are paid to find ways that he can do that – and they all involve cutting corners.
And so, Central Banks and Fractional Banking were invented. They go against the tried and tested rules of sound banking, but they are guaranteed to produce fortunes for the bankers. And when the system comes to grief, why the bankers are either dead or retired and enjoying their palatial mansions.
Fractional Reserve banking means that real savings are not the only funds that bankers can lend out and charge interest for.
As long as Present Savings are the only source of Present Loans, the present sacrifices of the savers are equal to the present expenditures of consumers and investors. New factories are built in the Present, with Savings existent in the Present. Production rises and the standard of living can increase, or savings can increase even more.
This is sound banking, and it has not satisfied the last few generations of bankers. It produces profits slowly, and bankers are people in a hurry to get rich.
So the bankers have invented false savings, to make more loans and get things moving. Prosperity without the pain of savings! The bankers have bought the idea, and the world has accepted it. The theory of creating false savings which can be lent out is the only one seriously considered at all schools of finance all over the world. All banking all over the world, is based on fictitious savings, on air – that's what is called inflation, because it is air.
Those who point out the glaring flaws in the System, are laughed at.
[link to www.plata.com.mx] |
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11/1/2008 1:44 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
House of Cards
By Danny Schechter.
The New York Times recently reported on page one that credit cards may be the next to go in the financial crisis. Danny Schechter published this similar warning last June in City Beat, a weekly newspaper in Los Angeles.
You thought the housing crisis was bad? You ain’t seen nothing yet.
The Mess
Nationwide, two million homes sit vacant. Home sales are at a nine-year low. Former Treasury Secretary Larry Summers says that housing finance has not been this bad since the Depression. We still don’t know the full extent of the colossal subprime rip-off, but a recent Bank of America study did some guesstimating on the scale of the consequences of the “credit crisis.” The meltdown in the U.S. subprime real estate market, the bank said, had led to a global loss of $7.7 trillion dollars in stock market value since October.
While many eyes are focusing on the housing meltdown and its hugely negative effect on an economy clearly moving into recession, few are paying attention to the next bubble expected to burst: credit cards. Combined with the subprime losses, such a credit card nightmare has the potential, experts say, of bringing down the entire financial system and global economy. You and your credit card have become key players in the highly unstable financial crunch. Mortgage lender cupidity and bank credit card greed wedded to financial institution deregulation supported by both political parties, have been made manifestly worse by Bush administration support-the-rich policies. It has brought us to a brink not seen since just before the Great Depression.
While campaigning in Edinburg, Texas, in February, Barack Obama met with students at the University of Texas-Pan American. “Just be careful about those credit cards, all right? Don’t eat out as much,” he said. After the foreclosure crisis, he warned, “the credit cards are next in line.”
The coupling of home equity debt and credit card debt has gone hand in glove for years. The homeowners at risk can no longer use their homes as ATM machines, thanks to their prior re-financings and equity loans, often used in the past to pay off their credit cards. Indeed, homeowners cashed out $1.2 trillion from their home equity from 2002 to 2007 to pay down credit card debts and to cover other costs of living, according to the public policy research organization Demos.
To compound the problem, fewer people are paying their credit card bills on time. And, to flip the old paradigm, more are using high-interest credit card cash to pay at least part of their mortgages instead of the other way around.
How bad is it?
• Financial analysts say that in the U.S. alone more than $850 billion in unpaid credit card balances is at stake and fast approaching $1 trillion, roughly the same amount as in the subprime market.
• CNN reports that worldwide, consumers have racked up more than $2.2 trillion in purchases and cash advances on major credit cards in just the last year.
• The unpaid debt portion of this is continuing to pile up, with U.S. consumers last year adding $68 billion against their credit lines, boosting credit card debt by 7.8 percent, the largest increase in seven years, just when the last recession was beginning.
• Even as they spent, consumers have been going into default at a stunning rate. The percentage of people delinquent on their credit cards is soaring, and credit card companies are now writing off somewhere near 5 percent of payments.
• By last fall, the major banks were setting aside billions for loan-loss reserves while anticipating an increase of 20 percent in non-payments over the next two to four quarters.
• Capital One, one of the biggest credit card banks, was forced to write off $1.9 billion in bad debt just in the last quarter of 2007.
•By October, according to a survey of only the leading credit card banks by the Associated Press, the value of credit card accounts at least 30 days late was up 26% from the previous year, to $17.3 billion. Serious delinquencies among some of the biggest lenders rose by 50 percent or more in the value of accounts that were at least 90 days delinquent.
• Making matters worse, or more widespread throughout the economy, just as with mortgage debt, credit card debt is put into pools that are then resold to investment houses, other banks and institutional investors. About 45 percent of the nation’s $900-plus billion in credit card debt has been packaged into these pools, and so many companies, not just a few, are at risk of being forced out of business by credit card debt write-offs.
What this adds up to, and what Obama didn’t say, is that we are actually face to face with the results of the most massive failure of our political and economic system since the Depression. Since Ronald Reagan, we have been living in an era in which neither the meltdown of the savings and loan banks in the 1980s nor the Enron-like scandals of the Bush years has stopped the relentless advancement and protection by both parties of the ability of financial institutions to make a buck at any cost to the social good and economic fabric. Which is what you get, of course, when both parties are so dependent on massive financial contributions to get their candidates into office and when the corporate media, heavy with advertising from the FIRE sector – Finance, Insurance and Real Estate – doesn’t warn the public or investigate the egregious fudging, misrepresentation and outright fraud that underpins the subprime and looming credit card crisis.
Priceless!
The credit card industry (Visa, MasterCard, American Express, etc.) and the 10 banks that dominate the industry as the primary card issuers spend an estimated $2 billion a year in endless marketing worldwide. We are all bombarded with their solicitations and sales tie-ins and gimmicks. They know that they might only have a 2-3 percent return rate, but that more than pays the enormous costs. They have thus succeeded in supplying 1.5 billion cards to 158 million U.S. card holders. That averages to 10 cards per person. In the last few years, retailers, banks, a wide range of companies, sports teams, unions and even universities have launched specialized card programs. Like the car companies that discovered that they made more money on car loans than automobiles, the benefits of what’s been called “financialization” is obvious to more business sectors.
Credit card advertising for new card holders is especially effective now as inflation drives costs up and consumers have less to spend. “Charging it” on yet another new credit card is for many the only option to meet their budgets or maintain their lifestyles, especially as gas prices rise. It’s become habit for many to spend more than they have. As a result, overall U.S. credit card debt grew by 435% from 2002 to year-end 2007, from $211 billion to approximately $915 billion.
The relentless, continuing push by the credit card banks doesn’t target potential customers alone. Constant focus group studies and other research techniques are still being used to persuade retailers to encourage more credit card transactions. Increasingly, businesses simplify their use by “swiping” and other gimmicks, no signed receipt needed.
“More and more sectors of the American economy recognize that their financial success is based on the success of the credit card industry,” explains Robert Manning, the author of the definitive Credit Card Nation and a leading expert who has been sounding the alarm about the consequences of credit card debt.
“Everything is very clearly thought out and premeditated. Whether it’s having conferences and think tank sessions about how to encourage people to accept more debt [or] to work with merchants – for example, to persuade merchants with empirical information that … if they use a credit card that they’ll buy 20-25 percent more.”
Manning notes that saving and thrift was historically a positive value in the U.S. As recently as the l980s, the national savings rate was 10 to 11 percent. Since 2005, Americans have saved less than 1 percent of their disposable incomes. In fact, the most recent figures from March show that the savings rate is negative, below zero. And also in March the government reported that for the first time since the Depression, Americans owe more on their ≠homes than they have in equity. Essentially, on average, America is broke and its credit cards played a dominant role in getting there.
Manning, who teaches at Rochester Institute of Technology, has taken on the issue with original research and financial literacy courses for students. He found that many of his students already had credit cards before they arrived on campus, some for years.
As we all know, the companies don’t tell about the downside when they are seducing customers. They offer low introductory or teaser rates, in the same way that mortgage brokers enticed sub-prime customers. They offer rewards, frequent flyer miles and other prizes. Students are especially targeted because they have little real-world financial experience. The U.S. Public Interest Research Group, which is campaigning against student debt, says the average is $4,000 per student, but it easily climbs after four years to $15,000 to $20,000.
All of this, in our globalized world, is not unique. Clear across the world and down under, the New Zealand Union of Students’ Associations (NZUSA) and bank workers’ union Finsec are joining forces to try and keep students out of high-interest debt. The amount students owe on credit cards has increased by 32 percent since 2004, according to the NZUSA Income and Expenditure Survey. Credit card debt has increased at a higher rate than low to no interest overdrafts.
Here in the U.S., one mother, Joan E. Lisante, has set up a website targeted at other parents, www.consumeraffairs.com, so they can tell their stories. She wrote recently about what she calls the “plastic prison.”
“My 22-year-old son Jon, a college senior, got 52 credit card offers in the last year. I know this because, like a CIA operative, I intercepted the offers pouring into our mailbox.
“He got 19 from Capitol One, 13 from Providian, six from Washington Mutual, four from Chase, four from eBay and one each from an assortment of lenders ranging from PayPal to First Premier Bank in Sioux Falls, South Dakota (co-capital with “Small Wonder” Delaware of the credit card kingdom).
“Most begged Jon to rip open the envelope and wallow in instant gratification. Capital One, the most persistent suitor, shouted, ‘Offer Status: Confirmed. No Annual Fee!’
“‘16 Card Designs’ (but none that tally the total whenever you use it). You could get a response in as little as 60 SECONDS when you apply online.
“Now this kid has never held a job (yet) for more than one summer. He spent one summer working in the FEMA flood insurance call center, which shows how much expertise you need to work there. Although he is familiar with the inner workings of Blockbusters and Starbucks, Jon’s not yet a member of any corporate elite, prestigious profession or skilled craftsman’s guild. Does this matter? Apparently not.”
“The key for the banks,” Manning says, “is to get them dependent upon consumer credit, shape their attitudes towards savings, consumption and debt and to then multiply the number of financial products that they’re buying from that particular bank so the credit card will lead to the student loan, to the car loan, eventually to a home mortgage and then maybe some insurance products and investment opportunity.
The banks, he says, want students in a condition of dependency. “Young people today that see credit as a social entitlement have no understanding of what it is going to entail to repay those loans back. Once they’re used to living on borrowed money, then the banks realize that they’ll be following that pattern possibly for the rest of their lives. By the time they graduate they’re so indebted, and they’re so dependent upon the use of credit and debt, that it’s already presaged their future. They can’t possibly pursue the kinds of careers that they anticipated.”
Defaults on student loans are climbing. Many students used those loans to pay off credit cards. Military recruiters are now promising to pay off debts to entice enlistments. Other government agencies are also offering funds as part of their head-hunting.
Rise Up
“Many of you have probably forgotten that the American Revolution was largely driven by the great American planners, that were heavily in debt to European banks and they had very onerous terms,” Manning said in a lecture I attended when I was making my film In Debt We Trust. “And they recognized that they could not financially prosper under such outrageous financial demands.”
On the day I visted Manning’s lecture in an alcove literally right next door to the lecture room in the student center, local branches of banks like Chase and HSBC were signing up students for checking accounts and credit cards. Freshmen lined up at the tables to set up accounts. The banks had permission from the same school administration that hires Manning to counsel students to avoid getting into debt.
I listened in at the pitches.
BANK REP: “You don’t need anything for deposit, and we’re giving out free backpacks.”
BANK REP: “You get zero percent on the purchases for the first six months and then it goes to the standard intrest rate.”
QUESTION: “What’s the interest rate?”
BANK OF AMERICA REP: “The interest rate is variable … to be honest with you, off-hand, I don’t know the interest rate off-hand. Sorry.”
A student is counting out twenties as his first deposit.
BANK REP: “I just need your signature. Right here, please.”
ANOTHER BANK REP: “And it’s free while they’re a student.”
What will happen when they do have to pay it back includes nonstop calls to them and their parents. Credit card collection agencies know how to harass, threaten and then sweet-talk cardholders who are late. They even have a term for people squeezed by debt: “sweatbox.” They also know that the longer the debt goes unpaid, the larger the potential profit for companies, as interest builds up at rates of up to 30 percent. Credit card promoters call people who only pay minimums “revolvers.” Those of us who pay our bills in full? “Deadbeats.”
Recently the companies unilaterally hiked late fees and penalties that compound the debt. A few missing payments can earn you an interest rate hike to 29 to 30 percent. If you are late with a payment on some other debt not related to your credit card, you can readily find your interest fee doubled on your credit card. Some companies make more on fees and penalties than on interest payments. The companies racked up more than $17 billion in 2006, the last year for which records are available.
Like many of the homeowners who accepted subprime mortgages, and like you with your credit cards, youths and adults alike signed dense agreements that are largely unreadable. The credit card banks constantly update these with those small print notices with which you get assaulted in the mail, these drafted by risk-minimizing lawyers. Of course, it’s unlikely you bother to read these. In part of the unread text, the companies give themselves the right to unilaterally change the deal even after it is signed. Other small print insures that consumers cannot sue them over differences. All grievances have to be arbitrated in a process the companies created and control.
Even the Federal Reserve Bank condemns some of these practices, noting: “Although profitability for the large credit card banks has risen and fallen over the years, credit card earnings have been consistently higher than returns on all commercial bank activities.”
The Failure Trifecta
Track the subprime and credit card mess back, and you will find its origins in free market policies since Reagan that deregulated banking and much of the oversight that managed for years to keep the greed-meisters on Wall Street in check. The failure of media-lionized Alan Greenspan’s Federal Reserve Bank to pay attention to predatory lenders and sub-prime schemers allowed them to prosper.
Add to these failures a complicit Congress, with Democrats and Republicans alike dependent on donations from the three leaders of the FIRE economy. To assure their freedom to run their businesses their own damn way, the banks in the 1990s persuaded Congress to deregulate the practices of financial service companies. Pro-business Court decisions have allowed them to base their operations in low-tax states like South Dakota and Delaware and to end consumer protections against usury.
This decade, Bush’s tax cuts and his bankruptcy “reform” bill strengthening the power of credit card companies were passed with bipartisan support, including that of Senator Dianne Feinstein. Add major media amnesia to this list and you get a trifecta of failure. The New York Times admitted that advocates warned them that a rise in predatory lending was destroying poor communities in 2001, but they sat on the story for nearly six years.
Neither the politicians nor the media told us that every major brand name banking firm and investment house had its fingers in the juicy pie of pedaling mortgage-backed securities worldwide without disclosing that many of these mortgages were deliberately offloaded on people whom they knew could not afford to pay them. As with the credit card industry, these mortgage borrowers were cleverly given “teaser rates” that would soon reset upwards. The banks then resold the mortgages as “asset-backed paper” even though the assets’ value was so questionable.
Meanwhile, media outlets took in hundreds of millions in ad revenues from deceptive lenders and credit card banks encouraging Americans to shop and charge till we drop. The Super Bowl broadcast ran all those cool but misleading ads by credit card companies and mortgage hustlers. It was, um, “priceless.”
Notes scholar Lionel Tiger: “Those who have been operating the managerial levers of the financial system have failed embarrassingly and massively to comprehend the processes for which they are responsible. They have loaned money avidly and recklessly to people who couldn’t pay it back.
“They fudged data to get loans approved and recalculated. Then they sausaged fragile figments of money reality into new ‘products’ which could be sold around the world to investors eager to enjoy the surprising returns which often accompany theft, managerial incompetence and fraud. When it comes to responsibility for all this, there appears to be no one here but us spring chickens.”
– Danny Schechter blogs for Mediachannel.org. His film In Debt We Trust spawned the action website StopTheSqueeze.org. He’s written a new book on the crisis called PLUNDER: An Investigation Into Our Economic Calamity. Dissector@mediachannel.org. |
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11/1/2008 1:47 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Plumbing the Depths of Depravity
Rob Kirby
Oct 29, 2008
First, for a bit of historical context, a little bit of fact-finding pertaining to Henry Paulson, complements of my friend, Jesse:
"I didn't know he was a member of the Nixon White House as his first 'real job.'
In 1970, fresh from the Masters program of the Harvard Business School, Paulson entered the Nixon administration, working first as staff assistant to the assistant secretary of defense.
In 1972-73, Paulson worked as office assistant to John Erlichman, assistant to the president for domestic affairs. Erlichman was one of the key figures involved in organizing President Richard Nixon's notorious "plumbers" unit that carried out illegal covert operations against the president's political opponents, including espionage, blackmail, and revenge. Erlichman resigned in 1973, and in 1975 he was convicted of obstruction of justice, perjury, and conspiracy, and was imprisoned for 18 months.
Utilizing his connections, Paulson went to work for Goldman Sachs in 1974. In a 2007 feature, the British newspaper the Guardian wrote, "Not only was he well connected enough to get the job [in the Nixon White House], but well connected enough to resign in the thick of the Watergate scandal without ever getting caught up in the fallout. He went straight to Goldman back home in Illinois."
Birds of a Feather Fly Together: The Plumbers Live On in Infamy
One thing that can be said for Henry Paulson - he's no average Joe. Through the use of overt threats, the Fed / Treasury tandem has connived law makers into further compromise of the public purse to insulate bank's balance sheets while the average Jane and Joe see their personal net worth's continue to deteriorate at an alarming pace:
Congressman Brad Sherman of California's 27th congressional district told the House in a speech on Thurs evening [Oct. 2nd] that several fellow Congressional representatives have said they were threatened with the prospect 'Martial Law' should they vote in opposition to the $700 billion bailout.
Congressman Sherman's revelation comes after multiple claims that this threat was being ramped up to aid the now $850 billion bail out through the House this past Friday.
According to numerous Congressional testimonies, the stark panic atmosphere which has gripped both Congress and the US media was intentionally created in order to 'fast-track' a financial bailout bill. Several members of Congress were told before Monday's vote that martial law might be instigated in America if the legislation failed.
During his speaking time on Thurs, Congressman Sherman stated explicitly, "Many of us were told in private conversations, that if we didn't pass this bill on Monday, the sky would fall, the market would drop two or three thousand points, another couple thousand the second day, and a few members were even told that there would be Martial Law in America if we voted no (to the bail out bill)."
Viewers can watch his actual testimony [CSPAN broadcast] from the House floor here:
[link to www.youtube.com]
The Bail-Out Was Never Intended for Main Street
As revealed in this N.Y. Times Article Oct. 24, 2008, we can clearly see that the Paulson Plan [bail-out] - utilizing targets helicopter money drops - was only ever intended to prop-up his Wall Street brethren - the Banks:
So When Will Banks Give Loans?
By JOE NOCERA
Published: October 24, 2008
It was Oct. 17, just four days after JPMorgan Chase's chief executive, Jamie Dimon, agreed to take a $25 billion capital injection courtesy of the United States government, when a JPMorgan employee asked that question. It came toward the end of an employee-only conference call that had been largely devoted to meshing certain divisions of JPMorgan with its new acquisition, Washington Mutual...
...The JPMorgan executive who was moderating the employee conference call didn't hesitate to answer a question that was pretty politically sensitive given the events of the previous few weeks.
Given the way, that is, that Treasury Secretary Henry M. Paulson Jr. had decided to use the first installment of the $700 billion bailout money to recapitalize banks instead of buying up their toxic securities, which he had then sold to Congress and the American people as the best and fastest way to get the banks to start making loans again, and help prevent this recession from getting much, much worse.
In point of fact, the dirty little secret of the banking industry is that it has no intention of using the money to make new loans. But this executive was the first insider who's been indiscreet enough to say it within earshot of a journalist.
It is starting to appear as if one of Treasury's key rationales for the recapitalization program - namely, that it will cause banks to start lending again - is a fig leaf, Treasury's version of the weapons of mass destruction.
Sweet Little Lies: Fed / Treasury Double-Talk or Crooks in a Colander?
With all of this money being added to the financial system, does it not strike anyone as being "odd" that none of this 'liquidity' has filtered down to the grass-roots level?
Understanding the fallacy that "IS" the OTC derivatives complex begins and ends with the obscene concentration[s] that were allowed to propagate within the Fed-friendly confines of J.P. Morgan Chase - initially in the interest rate complex through unbridled growth in Interest Rate Swaps - which aided and abetted the falsification of inflation data to render interest rates ineffective as arbiters of capital and later through the proliferation of artificial, price suppressing supply through exchange traded [COMEX] precious metals futures. The true purpose of these systemic corrupting instruments is EXACTLY the reason why Sir Bubbles of Greenspan so ardently lobbied for them to remain unregulated - he bloody well knew these instruments WOULD NEVER SURVIVE the scrutiny of daylight!
Having seemingly tamed [eradicated, perhaps?] the effectiveness of interest rates [circa, early to mid nine-teen nineties] - the Federal Reserve and their globalist allies in government were now positioned to profligately reshape the world without the historic constraints of rising rates or the sounding of the historic clarion alarm bell - rising precious metals prices. To suggest that this was not planned and executed at / by the very highest levels of the U.S. leadership is to be completely ignorant of the sense of entitlement clearly exhibited through the words of such luminaries as, V.P. Richard Cheney, when he reiterated to [then] Treasury Secretary Paul O'Neill,
"Reagan proved deficits don't matter," Dick Cheney told Paul O'Neill during a Cabinet meeting. "We won the (2002) midterms. This is our due."
[The words of the former Treasury Secretary in his book, "The Price of Loyalty." Since Cheney had been responsible for bringing the "straight shooter" O'Neill into the Bush administration, we can take O'Neill's words for the truth.]
If we look at the fundamental-defying, recent meteoric rise in the U.S. Dollar Index, we can trace its roots to systemic institutional failure brought on by the mortgage-backed-security led implosion of the OTC derivatives complex first signified by the demise of mortgage lender Indy Mac:
What folks need to understand is that the global OTC derivatives market - measured in tens or hundreds of Trillions - is virtually all U.S. Dollar denominated. Its SYSTEMIC failure - which is now occurring - requires U.S. Dollar balances to clear [settle] the trades [bets]. This has created the paradoxical global demand for U.S. Dollars - the currency of a country that is fundamentally bankrupt.
By rationing credit to hedge funds that were naturally levered and "long commodities" [institutions like J.P. Morgan routinely took the other sides of their customers commodities bets, ruining institutions like Nat. Gas player Amaranth] - and propping up the balance sheets of those who were "short commodities" - the Banks - the Federal Reserve led cabal of Central Bankers have ENGINEERED the collapse in commodities prices while creating the illusion that market commentator, Dr. Jim Willie, so aptly described as The USDollar Death Dance.
The engineered collapse of the commodities complex became necessary in the eyes of monetary elites because the rush for tangibles and corresponding repudiation of fiat money was becoming manic - as so CLEARLY evidenced by the emerging shortages of precious metals, gold and silver bullion.
Caught In Their Own Lies
If the Fed / Treasury wanted to ensure that banks would actually lend any of this freshly-created-out-of-thin-air money, they WOULD NOT have undertaken the dramatic round of issuance of CASH MANAGEMENT BILLS - giving banks and financial institutions the sovereign surety offered by Treasuries. In the absence of these Cash Management Bills, idle cash would have "piled up" on banks balance sheets - forcing them to behave like commercial banks are supposed to, lending to corporate customers.
Details of CASH MANAGEMENT BILL AUCTIONS [pdf] [$ DRAINS] in Oct,, 2008:
The Fed / Treasury Game Plan
To begin wrapping our heads around what these clowns are really up to, one only needs to examine the most famous, historical "government / bank fleecing" - during the GREAT DEPRESSION - which serves as a handy guide:
...in 1933, Franklin Delano Roosevelt dealt with a monetary and banking crisis by confiscating all privately owned gold; paying for the gold at $20.67 per ounce; immediately devaluing the dollar by 40 percent; and setting the price of gold at $35.00 per ounce. At a single stroke, Roosevelt increased the government's gold assets, stabilized the monetary system and increased wholesale prices by more than 33 percent. However, he also inflicted losses of 40 percent on gold owners and stripped them of the gold that they saved to insure their financial futures.
In a world which has embraced globalism, and one where America has most assuredly already disposed of most, if not all, of its sovereign gold stocks [the real reason that the Fed / Treasury refuses to permit a proper 3rd party audit] - another gold confiscation is apparently not in the cards. The reason: the Fed / Treasury are only too aware that the gold bullion they have squandered is now - irretrievable - in the hands of other sovereign entities. After all, the bullion banks that the bearded and bald one are now bailing out - they brokered the swindle - and know exactly where all the bones are buried!
But there's more than one way to 'skin a cat' [or Jane and Joe Sixpack, perhaps?].
In this regard, it should surprise no-one is the fact that Sir Benjamin of Benedict Bernanke is one of the world's foremost students of the Great Depression:
Bernanke is a student of Great Depression, Red Sox
WASHINGTON (AP) - Five years ago, Ben Bernanke posed the prescient question in an op-ed in The Wall Street Journal, "What Happens When Greenspan is Gone?" ...
...In the world of economic theory and policy, Bernanke, 51, has espoused targeting inflation, stressed the importance of communication and transparency by the Fed and argued that the final say on debts and deficits lies with the president and Congress...
Mr. Transparency
When one stops to consider that the foundations of the science of 'economics' is built upon the study of past conditions and events and looking for similarities in modern times; we can use this methodology to predict likely outcomes in the here-and-now.
Well, we've got intrinsically valuable tangibles [commodities and real estate] prices being ENGINEERED down by monetary authorities. Bank's balance sheets are being "artificially" bolstered by their partners in government to take advantage of depressed prices prior to "REFLATION" [likely to be signified by the cessation of issuance of Cash Management Bills?]. And heck, the most bankrupt entity on the planet - the U.S. Treasury - is even getting in on the act by purchasing mortgaged backed securities for 'pennies on the dollar'. Just think about that: when the great reflation occurs - The U.S. Treasury might even have their pitiful "leaky" balance sheet restored and made whole once again?
It would only be history repeating itself - all at the expense of folks who acted prudently in the face profligate government / banker money creation.
You just can't make this stuff up. Sounds like a true story-book ending, eh?
Rob Kirby
email: rkirby@kirbyanalytics.com
website: Kirby Analytics |
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User ID: 539413
11/1/2008 2:00 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The gold & silver futures markets are each hurtling down a dangerous path toward possible default. The artificial paper price has created enormous physical demand, and hampered supply production, if not delivery. The gap between the corrupted paper price and the legitimate physical price in actual trading markets has grown sharply, enough to force a breakdown like in any distorted market. When December contracts in gold & silver are demanded to be satisfied via delivery of the metal, we could easily see the COMEX fail in delivery. A default is highly likely.
The USFed cut the official interest rate again by 50 basis points, now to 1.0% on the Fed Funds target, in utter desperation. Other central banks did not join in rate cut exercises. The Euro Central Bank is expected to cut next week, reluctantly. So is the beleaguered Bank of England. The pressure is building on gold demand. Now with the official US price inflation at CPI = 5% or so, the real rate of money cost is minus 4%. The actual price inflation runs more like 10% to 12%, making the real cost of money more like minus 9% to minus 11%. GOLD RESPONDS TO NEGATIVE REAL RATES VERY FAVORABLY.
GALLOPING RECESSION TO FORCE MORE INFLATION
[link to www.gold-eagle.com] |
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User ID: 540126
11/1/2008 12:48 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
NEVER in history has this happened before.
As of Oct. 23, Non-Borrowed Reserves and Bank Reserves equal nearly the entire monetary base.
The Federal Reserve now needs a reserve for the reserves. Hyperinflation, here we come (prior to total collapse.)
10/23 Bank Reserves 328,597 MILLION; Monetary Base 1,143,873 MILLION; Non-Borrowed Reserves (-362,550) MILLION; TOTAL Borrowed 691,147 MILLION
[link to www.federalreserve.gov] |
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User ID: 540126
11/1/2008 1:09 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Gold coins in short supply, command 50% premium
2008-10-30 14:15:00
[link to www.commodityonline.com]
Commodity Online
CALIFORNIA: Popular gold and silver coins such as the one-ounce gold and silver American Eagles produced by United states Mint is not available for sale in the market and those who sell do it at a premium of 50 percent or more on spot price, according to Michael Maroney, Vice President, Monex Deposit Company.
"One-ounce and smaller gold and silver coins . . . ten-ounce and hundred-ounce silver bars . . . ten-ounce ingots and 32.15 ounce "kilobars" of gold have virtually disappeared from the marketplace," explains Maroney. "They're in private hands now, and people are holding onto them, unwilling to sell them back into the market." |
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User ID: 540126
11/1/2008 1:11 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
[link to www.atimes.com]
Nov 1, 2008
Gold, faith and credit
By The Mogambo Guru
Like many people, I have been looking at the price disparity between the market prices of gold and silver bullion (averaging about US$1,000 an ounce for gold and $16.50 an ounce for silver) versus the prices of gold and silver futures (about $730 and $8.90 respectively), and I am thinking to myself that I would love to get a piece of that luscious arbitrage action where I buy the gold and/or silver futures at a low price while simultaneously selling the same gold and/or silver bullion at a higher price, telling the buyers that they must pay in advance and then wait up to a few months for me to deliver their gold and silver, pocketing a hell of a lot of money on the buy-sell spread and the interest the money earns until the futures contract matures so that I can take delivery and
settle up, and then spend the rest of my life on a wild, hedonistic spree of spending, spending, spending!
Then, sadly, I remember that such a plan requires money, and I don't have any money because I have already spent all my money thanks to inflation in prices killing me, thanks to the damned Federal Reserve and the demonic, loathsome Alan Greenspan who was its chairman from 1987 to 2006, and who is directly responsible for all our economic problems; and every time I think about it, I get more angry, and I want to scream, scream, scream in my Anguish And Outrage (AAO)! |
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User ID: 540126
11/1/2008 11:16 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
It's Not The
Economy, Stupid!
By David Chu
NoForeclosure.info
11-1-8
Bill Clinton's campaign slogan was: "It's the economy, stupid!"
Actually, that was James Carville's maxim and battle cry for the 1992 presidential election. Mr. "Ragin' Cajun" Carville, as you probably don't remember, was the commander-in-chief of Bill Clinton's first campaign for the White House. He was and is married to Mary Joe Matalin who happened to be working on George H.W. Bush's 1992 re-election campaign! Ms. Matalin was also an assistant to President George W. Bush and a special counselor to Vice President Dick Cheney until 2003.
Talk about sleeping with the enemy! If their marriage of political convenience and "political operativeness" does not wake you up like a freezing morning shower, then you should go back to sleep in the Matrix (i.e., how they can be involved in both the Republican and Democrat presidential campaigns in 1992 at the highest levels and sleep in the same bed literally, and still be able to get away with it is a testimony to the blatant and absolute corruptness in U.S. politics):
Every four years the powers-that-be (PTB) that control Washington, D.C. and Wall Street trod out candidates from two sides of the same coin that they own. The little people, programmed by the corporate mass media and separated into two self-feeding troughs called the "left" and the "right" as in donkeys and elephants, cheer on as though their candidate is the one who is finally going to lead them to their promised land. And every four years, the disappointment on both sides grows and grows.
Were not the Democrats elected to Congress during the 2006 election to stop the Iraq war? What happened? All that the madam speaker of the House, the Democrat congresswoman from San Francisco, has to do to stop the illegal and inhuman Iraq war is to withdraw military funding for the war by not considering the spending amendments and bills that come up which is the fiduciary prerogative of the U.S. Congress. It's pretty simple, but she doesn't want to do that for many reasons that will not be discussed here.
Mr. Obama, under the tutelage and supervision of "neolib" Zbigniew Brzezinski, has openly stated, but not widely reported in the corporate mass media, that he wants to move many U.S. troops out of Iraq into Afghanistan for more fighting there. Why?
Mr. Brzezinski is the Democrat soulmate of Dick Cheney: both want wars without end for their masters in the U.S. corporate military industrial complex, but they differ in their approach and who their proclaimed public enemy is. For Mr. Cheney and the neocons, the enemies are the so-called "Islamofacists" who were created by the neolibs, specifically by Mr. Brzezinski, to fight the Soviets in Afghanistan when he was the national security advisor to the peanut farmer from Georgia. Neolib's new enemy during a possible Obama administration will be an old enemy: the Russians. And that is why Mr. Obama wants those troops moved.
According to Patrick Briley who writes for Newswithviews.com, this man may be Obama's "Rasputin" (google his article titled "Brzezinski: Obama's Globalist 'Rasputin'"). Mr. Brzezinski is a geopolitical chameleon, opportunist, and, even more significantly, a presidential "handler" who needs to be watched very carefully as you would with Dick Cheney and Henry Kissinger:
Zbigniew Brzezinski is Barack Obama's foreign policy advisor. Brzezinski was the national security advisor for President Carter from 1977 to 1981. In 1988 he endorsed HW Bush for President and was Co-Chair of the HW Bush national security advisory task force. From 1987 to 1989 he also served on the HW Bush's Foreign Intelligence Advisory Board. Clinton Secretary of State Madeline Albright was a student of Brzezinski. GW Bush Secretary of State, Condi Rice (also a former national security advisor), who studied under Albright's father, shares many of the same world government views with Brzezinski and Albright.
Were not the Republicans elected every four years to cut government spending as they keep promising a smaller federal government that only grows exponentially? In case you haven't noticed, the total U.S. public debt has exploded from just under $6 trillion at the beginning of 2000 to approximately $14.5 trillion now (this latest tally includes Fannie Mae and Freddie Mac mortgage liabilities that the U.S. Treasury unilaterally assumed for the U.S. a couple of weeks ago without any input from the American people or their so-called representatives in Washington, D.C.)
From a historical perspective and for comparison sake, it took the U.S. from 1776 to 2000 to reach a total public debt of just under $6 trillion. The current resident of the White House has more than doubled the taxpayers' debt! What took 224 years to accomplish, if you can call it that, the current president did it in less than 8 years! How is that for the legacy of a "conservative," "free market," "small government," "we are not into nation building," Republican president?
What about Mr. McCain? What about him? Is he not the one who has publicly stated that he wants a war for one hundred years in Iraq alone? In response to a question from the audience (at a New Hampshire town hall meeting) concerning the possibility that the U.S. military might be staying in Iraq for the next 50 years, Mr. McCain dryly replied, "Make it a hundred."
Didn't he also recently confess to the Wall Street Journal editorial board, "I don't really understand economics"? He then pointed to former Senator Gramm whom he had brought to this meeting and told everyone in the room that Mr. Gramm is the expert he turns to for expertise on the subject of economics (the former Senator, for those who don't know, is one of two people most responsible for the financial crisis at hand, the other being Alan Greenspan!).
And Mr. McCain is going to take over the captaincy of the U.S.S. Titanic just as it careens towards the $1,000,000,000,000,000+ ($1+ quadrillion) derivatives "debt berg" straight ahead in plain sight? Enough said.
Politics is just a game.
To the PTB and their public servants like Mr. Obama and Mr. McCain, politics is just a means to swindle the little people every four years by lying and promising anything and everything to get elected. This 2008 election will be the "crossing the Rubicon" moment for the U.S. The little people better wake up because they are the ones who do the real work and create the real wealth by producing tangible goods and services that are needed in the arena of human commerce. This brings us back to the topic of this article.
The Real and the Unreal
What is confusing about what's going on with the financial markets crashing on Wall Street and the mega bailouts raining down like manna from Washington, D.C. is because most Americans don't understand the difference between two concepts: the "real economy" of goods and services versus the world of "unreal finances" (my present day term for what has been called the "money trust"* in the past) where money is created out of nothing and money is made on top of money. This mental confusion or brain fog over the real economy and unreal finances is purposefully maintained by the corporate mass media and the public education system through their deafening silence on the difference between the two.
The definition of the word "economy" is "the wealth and resources of a country or region, especially in terms of the production and consumption of goods and services." And the definition of the word "finances" is "the monetary resources and affairs of a country, organization or person."
To differentiate the word "finances" that you and I understand and use in our everyday lives, i.e., paying bills and earning a daily wage, versus the world of high-powered money used and abused on Wall Street, I am calling theirs "unreal finances."
And to illuminate these rather dry but crucial and even life-and-death concepts, I am going to quote at length from a very important newsletter written by Joel Skousen from the World Affairs Brief on March 14, 2008. Mr. Skousen provides penetrating analysis, commentary and insight into the reasons and causes behind the news in politics, economics and finances. An annual subscription to his weekly online newsletter is only $48 and is highly recommended ( HYPERLINK "< [link to www.worldaffairsbrief.com>http:] www.worldaffairsbrief.com). My comments are in brackets below.
In reality, there are two separate economic worlds now, not one--even though they are interconnected [just to be clear: there is one "economic" world where real goods and services are produced, and there is one "financial" world where money is created from nothing]. One is real and public [the "real economy" where the little people live and breathe]; the other is a world of secret monetary creation and financial flows between speculators and insiders with first or second access to new money (and they hoard gold in central banks, incidentally, as the ultimate value) [the world of "unreal finances" of Wall Street and Washington, D.C.]. Yes, eventually the new money flows down into the real markets of goods and services, but there is a huge financial world out there that operates solely on the trillions of dollars that have been created out of nothing. It's a world that does nothing but play on the rise and fall of trends within paper markets.
The real economy of business, industry and actual production of goods is relatively slow to change and grow. It takes time to transform entrepreneurial ideas into concrete products and services. Real productive enterprises create jobs and increase productivity and overall efficiency by providing goods and services that do something better than what existed previously. Economic growth and progress in the real world only comes through making a profit and investing those savings in new enterprises [this is the general theory of the "free enterprise system" which doesn´t really exist at the upper echelons of the market place]. This takes time. Even in the old world of finance, things took more time. Savings were invested in banks that loaned out funds to other endeavors, and were paid back with interest. Banks could only loan funds as new money came in or as old loans were repaid.
All of that changed with the invention of fiat money, created out of nothing and spent into the economy by government [and by the banks through the creation of loans: approximately 95% of the U.S. money supply is created by the banking system, while the rest is created by the U.S. government through the Federal Reserve]. This monetary and credit creation did not need to wait on tax revenues or savings to be generated and thus it altered the speed of monetary circulation within the economy. The only reason it wasn't highly inflationary is that foreign trade kept absorbing large amounts of our inflated currency, shielding the US from hyperinflation [one of the only reasons why the U.S. has not yet experienced the hyperinflation of Weimar Germany from the 1920's is because the U.S. exports the billions of dollars it creates from nothing to other nations in exchange for their real goods and services--this is the greatest economic and financial scam or pyramid scheme in the world and probably in history].
A large portion of this government induced inflation surged into the economy through the military industrial complex, leading to huge profits and exaggerated compensation for top executives. Over several decades this habit of paying millions in salary and bonus to executives worked its way through civilian companies. This excess compensation, including fat pension funds, coupled with inflated stock options fed the spectacular rise of mutual funds and investment banking that ultimately funded the dot com boom of the 90's. Yes, the high tech boom would have happened at some time, but not as fast were it not for excessive monetary inflation flooding the markets.
Injection of fiat money alters the natural risk factors of the economy by vastly increasing the number of insider wealthy people who can afford to take high risks--because they are tapped into the bottomless pit of government contracts, or are downstream of those contracts. People who have first access to the free money become high rollers like government itself. That's why government makes such bad investment decisions full of waste and fraud. If it's lost, there is little personal liability. They just create more money next year.
In the presence of government inflation of the monetary supply (especially when it exceeds the true growth of economic output), an increasing number of people (with first, second and third use of the new money) have a lot of excess money looking for a place to earn a profit. Normal, solid business opportunities don't interest them. These take time to provide a return and it is usually less than 8% unless you are the business owner himself--which few nouveau riche want to become. Thus, speculative markets begin to grow exponentially as places to park money and make high profits without having to wait years for a business to succeed and mature.
There have always been markets for paper assets, but they have grown much larger in recent decades as a percentage of the entire economy compared to what I call the real economy of production. These paper asset markets are essential to the function of business and industry [but only to a certain and limited degree], but they now have a life of their own and feed off speculative market moves alone. This is not a rant against speculation per se, because you technically can't distinguish between good and bad speculation until the results are in [I submit to you that all derivatives speculations are bad and non-productive as they pertain to the real economy and the little people]. But, I can recognize when people and institutions are simply gambling on the markets with no thought of producing anything of benefit, except huge profits. . . .
And their even bigger losses are now typically bailed out by the U.S. taxpayers, care of the U.S. Treasury and the Fed.
The End Run
What is taking place with the financial collapse of Bear Sterns, Lehman Brothers, Merrill Lynch, AIG, Washington Mutual, et al. is taking place in the world of unreal finances, not in the real economy. Very key difference. However, let's be totally clear: what happens in the world of unreal finances will eventually spill over and affect the real economy sooner or later.
This is because real businesses require loans to carry on day-to-day business operations (short-term commercial paper) and to expand production and growth in many cases. The collapse of the investment banks in the world of unreal finances is resulting in the collapse of perhaps the entire banking system including commercial banks that do business in the real economy. This is adversely affecting the ability of businesses to borrow money from commercial banks, or to repay existing loans as their banks suddenly collapse and/or are swallowed up by the key insiders corporations like JPMorgan Chase, Citicorp, Bank of America, etc.
What the PTB are attempting to do is to delay the inevitable collapse in unreal finances by adding more gasoline (what I have called "financial heroin" in my last article) to the financial fires on Wall Street. This will cause the temporary financial euphorias on Wall Street that we are witnessing with increasing frequency. But that is not all that the PTB are attempting to accomplish.
There are at least three crucial objectives that the PTB are trying to push and rush through the U.S. Congress (viz. the $700 billion bailout recently passed and other bailouts currently on the drawing board) under the guise and rare opportunity of the current financial crisis:
Bail out their servant class and their insider corporations on Wall Street with hundreds of billions and even trillions of U.S. taxpayer's money.
Usurp more unconstitutional control by creating an executive position, a new U.S. Treasury Secretary, that borders on financial dictatorship.
Kill the intent and purpose of the Glass-Steagall Act once and for all by combining so-called investment banks like JPMorgan Chase, Goldman Sachs and Morgan Stanley with commercial banks such as Washington Mutual, Wachovia, and Bank of America as is being done right now by these investment banks.
**
It's the Unreal Finances, Stupid!
The $700 billion dollars [a number admittedly pulling out of the thin air as a U.S. Treasury spokeswoman reportedly told Forbes.com last Tuesday: "It's not based on any particular data point. We just wanted to choose a really large number."] bailout scheme proposed by the U.S. Treasury Secretary and the Fed Chairman and passed by the U.S. Congress on October 3 is solely for the rescue the world of unreal finances: those who have played one too many financial crapshoot games with trillions of dollars of bets on such toxic financial instruments or so-called investments as "credit default swaps," "interest rate derivatives," and "mortgage backed securities," just to name a few.
They are crying out to Uncle Sam to bail them out after they have made and lost trillions of dollars on their atrocious gambles. As Catherine Austin Fitts (former Assistant Housing Secretary under George H.W. Bush) said on the Jeff Rense Radio Program (rense.com) last Wednesday, and I am really paraphrasing here: "It would be akin to you and I picking the wrong Super Lotto numbers and then having Uncle Sam come and bail us out by rewarding us the jackpot even though we didn't pick the winning numbers!"
That is what Wall Street is attempting to do with the crucial assistance and blatant insistence of one of their very own who now controls the U.S. Treasury and has unlimited power to do whatever he pleases as he quietly becomes the financial dictator of the United States. Henry Merritt "Hank" Paulson Jr. was the chairman and chief executive officer of Goldman Sachs. Now he is the 74th U.S. Treasury Secretary. And he is the financial dictator of the United States!
The Paulson Act and Financial Dictatorship
To wit: the $700 billion bailout scheme proposed by Paulson, Bernanke and Bush and passed by Congress instituted the following unconstitutional powers (italicized and bolded emphasis is mine):
"The Secretary's authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time."
"Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
I would list more egregious usurpation of power proposed by this mother-of-all bailout scheme (which should be truthfully called the "Paulson Act"), but these two statements are quite enough.
What the former Goldman Sachs CEO has done is to consolidate total unlimited financial powers of the United States in the hands of one person, in himself as the Treasury Secretary, untouchable by any judicial courts--even the U.S. Supreme Court. Anyone who believes that he will simply slither back to Wall Street come January 20, 2009 is naively living in fantasyland, because the next administration (either Obama or McCain) will be forced to "retain" his services since he is doing such a great job for his Wall Street buddies and for the crooks in Washington, D.C. For those of you who don't know, Obama is the biggest recipient of Goldman Sachs largess. McCain will be forced to keep Paulson as the Treasury Secretary since the former is a bit short when it comes to understanding economics.
All the political arguments about (1) why this bailout scheme must be passed immediately or the financial markets are going to hell in a hand basket, (2) limits on executives pay and compensation, (3) protecting the middle class, and (4) enacting new rules and regulations were just smoke screen or diversionary tactics promulgated by the crooks on both ends of Pennsylvania Avenue and on Wall Street, and gladly assisted and facilitated by the corporate mass media.*** These crooks are not even using the $700 billion (actually $850 billion in you read the fine print) as they had advertised (lied about), but they are using it to bail out the insider banks! These wolves in fancy Hartmarx, custom-made business suits recently bailed out 9 insider banks to a tune of $250 billion! Didn't they scream that the financial markets would collapse if the Paulson Act didn't pass? Well, since the passage of this bill, the DOW has plunged from 10,325 to 9,325: 1,000 points!
The real reasons why they had to push this financial coup d'état through the U.S. Congress as quickly as possible before the little people wake up! Like they did with the midnight passage of the Federal Reserve Act of 1913 on Christmas eve when most representatives of Congress who opposed that Act were away for Christmas, the PTB had to get this Paulson Act passed before Congress recessed for the November 4 elections! And they did it to the extreme frustration of millions of little people.
As columnist Jason Linkins so aptly stated in his Huffpost.com blog from September 22, this is the "mother of all bailouts":
In short, the so-called "mother of all bailouts," which will transfer $700 billion taxpayer dollars to purchase the distressed assets of several failed financial institutions, will be conducted in a manner unchallengeable by courts and ungovernable by the People's duly sworn representatives. All decision-making power will be consolidated into the Executive Branch - who, we remind you, will have the incentive to act upon this privilege as quickly as possible, before they leave office. The measure will run up the budget deficit by a significant amount, with no guarantee of recouping the outlay, and no fundamental means of holding those who fail to do so accountable.
Think of the Paulson Act as the last-minute financial pardons of President Bush before he leaves office, the financial equivalent to the last-minute political pardons of President Clinton for his crook friends like his half-brother and fugitive financier Marc Rich.
As Robert Kuttner warns in his American Prospect article from September 22, the Paulson Act is unlike any of the other mega bailouts in recent history (my comments are in brackets):
The deal proposed by Paulson is nothing short of outrageous. It includes no oversight of his own closed-door operations. It merely gives congressional blessing and funding to what he has already been doing, ad hoc. He plans to retain Wall Street firms as advisors to decide just how to cut deals to value and mop up Wall Street's dubious paper. There are to be no limits on executive compensation for the firms that get relief, and no equity share for the government in exchange for this massive infusion of capital. Both Obama and McCain have opposed the provision denying any judicial review of decisions made by Paulson [so they proclaim publicly, but as the record shows both of them voted for the Paulson Act]-- a provision that evokes the Bush administration's suspension of normal constitutional safeguards in its conduct of foreign policy and national security. . . .
The differences between this proposed bailout and the three closest historical equivalents are immense. When the Reconstruction Finance Corporation of the 1930s pumped a total of $35 billion into U.S. corporations and financial institutions, there was close government supervision and quid pro quos at every step of the way. Much of the time, the RFC became a preferred shareholder, and often appointed board members. The Home Owners Loan Corporation, which eventually refinanced one in five mortgage loans, did not operate to bail out banks but to save homeowners. And the Resolution Trust Corporation of the 1980s, created to mop up the damage of the first speculative mortgage meltdown, the S&L collapse, did not pump in money to rescue bad investments; it sorted out good assets from bad after the fact, and made sure to purge bad executives as well as bad loans. And all three of these historic cases of public recapitalization were done without suspending judicial review.
People: Now that the Paulson Act has passed by your so-called representatives in the U.S Congress, it is the beginning of a dictatorship in the United States in one fell swoop!
****
But you have one last chance.
It is time for the people of the United States of America to get off your collective easy chairs and stop watching the senseless and stupid unreality and sports programs, and start throwing out all your elected representatives in Washington, D.C. who voted for the Paulson Act:
"Because you voted for the Paulson Act, I will not only vote against you but I will make sure to defeat you on November 4th!"
Your children's future and the future of your children's children are on the line!
You have no more time to procrastinate!
Throw out those inept Wall Street servants and parasites in Washington, D.C.!
You have no person to blame except yourself (and the American people) now that the Paulson Act has passed!
It's not the economy, stupid!
It's the unreal finances!
______________
Back in the early 1900s, the U.S. Congress and people in general called them the "money trust": a cabal of financial and economic monopolists such as J.P. Morgan, John D. Rockefeller, Andrew Carnegie, and many others who abused the public trust by consolidating absolute financial control over many industries including the banking system.
**
The following is taken from a footnote in my ebook, NO Foreclosures!:
The term "Investment Bank" is an oxymoron. The Glass-Steagall Act was passed by the U.S. Congress in [1933] after the rampant bank speculations that led to the Great Crash and the subsequent Great Depression. The purpose of this Act was to prevent commercial banks (whose primary task is the safe keeping of the depositors' money and the preservation of their savings) from selling investments (engaging in speculation and other forms of financial gambling) which are clearly two opposite and contradictory fiduciary responsibilities. It was the massive bank speculations that precipitated the Great Crash in 1929 that finally forced Congress to pass this Act. However in 1999, the U.S. Congress led by former Senator Phil Gramm (now a vice chairman of the Swiss financial conglomerate UBS and chief financial advisor to Republican presidential nominee John McCain) enacted the Gramm-Leach-Bliley Act repealing the Glass-Steagall Act. So began the mega-mergers between formerly separate investment firms and commercial banks, and, more importantly, the merging and meshing of their separate and distinct fiduciary responsibilities. And so too began the current financial problems with investment banks trading in trillions of dollars of unregulated derivatives.
***
Here are my financial and political solutions, some borrowed from many fine and knowledgeable individuals, to begin the process of saving the U.S.S. Titanic from going down:
The financial markets or unreal finances need wholesale market corrections, and many of these financial corporations must be allowed to fail and go bankrupt without any government interventions or bailouts. Whatever happened to capitalism and the free enterprise system?
Many of the executives from these financially bankrupt and morally corrupt corporations must go to jail. Do not pass 'go' or collect on your golden parachutes and millions of dollars of bonuses, but go directly to prison!
If the U.S Congress is serious about protecting the financial health of the middle class as they proclaim, they must pass a law to outlaw all family home foreclosures for a period of at least 2 years starting immediately, and let the banks and money lenders take the serious financial hits which they rightfully deserve as they are the ones who created this financial mess in the first place.
Congress must enforce the Glass-Steagall Act of 1933 immediately and nullify the Gramm-Leach-Bliley Act of 1999 by outlawing investment banks from combining and merging with commercial banks, and from performing the fiduciary responsibilities of commercial banks (i.e., collecting and safeguarding the depositors' savings), and vice versa.
The U.S. president must issue an executive order (1) making all derivatives that originate in the U.S. null and void, and (2) outlawing all trading activities involving derivatives.
If the U.S. government is going to spend hundreds of billions of new taxpayer's money, they must only be allowed to use this newly created money to build real infrastructures such as replacing old and failing bridges, repairing dilapidated freeways and highways, building new mass transit systems in large cities, etc. Once these public works projects are completed, the government must extinguish the formerly created money supply either through taxation or by official retirement of the debt instruments used to create the new money.
The U.S. must get rid of the privately owned Federal Reserve System once and for all. Or nationalize it under the full and direct control of the U.S. Congress. This way when the nationalized Federal Reserve is again instrumental in creating recessions or depressions as is the case in its sordid history since its inception in 1913, it will be the people's representatives who will face the music and the full accountability of the Feds actions or non-actions.
The U.S. military must come home! No more spending almost $1 trillion of the taxpayer's non-existent money each year on the illegal wars in Afghanistan, Iraq, Pakistan, Iran, and elsewhere, and on maintaining the greatest empire in the history of this planet with at least 761 military and covert bases in more than 130 countries throughout the world (there are only approximately 194 countries on the entire planet!). That is exactly what the United States truly is when you understand that even the Roman and British empires had only approximately 37 and 36 major military bases worldwide at the zenith of their global empires, respectively. Where are they now?
****
If you need help in directing your anger and frustration at your elected representatives, check out the following websites:
[link to www.votesmart.org]
[link to www.seektress.com]
www.votenobailout.org
David Chu is the author of NO Foreclosures!
[link to www.noforeclosures.info]
Copyrighted © 2008 by David Chu |
| WalkerTalker
User ID: 489888
11/2/2008 12:17 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
It is dizzying trying to go through the legnthy articles posted on this thread. Is a college degree available for reading through all of them?? |
| .
User ID: 540126
11/2/2008 2:12 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Then in October 1929, Baruch and Rockefeller and the Morgan interests etc. simply called in all of the margin loans, forcing people to sell their stock to pay the loans. (By the way, did you know that the securitized housing loans for houses now foreclosing today were also largely bought on margin? Please stick with this story it is more relevant to our situation today than you could have imagined.) So in the first of the three "black days" of the 1929 Stock Market Crash, the market, by this deliberate means of margin calls, began to tumble. People were selling in response to the calls but at prices insufficient to repay the loans being called in. The distressed selling mounted.
The corporation stock that people had bought over the years in a steadily rising market were not being unloaded for figures closer and closer to nothing. The ticker tape, the world's means of keeping pace with market developments at the time, began to run two hours behind. It was at this point, as the history books tell it, that the Money Syndicate (the investment bankers) chose to "support the market" and buy up stock -- but of course "supporting the market" was not their real intention, as the ticker was behind and as they bought up the socks the citizens selling were still seeing only the ticker tape showing a tumbling market -- the "support of the market" was in fact pure predation -- ownership of all of that new expansion of corporations during those wonderful 1920's was being transferred from the citizen stock holder to the Money Power syndicate.
[link to www.rense.com] |
| FHL(C)
User ID: 468982
11/2/2008 11:58 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
with thanks to the AC
[link to www.godlikeproductions.com]
FU&FW
Global Panic Spreads
The largest debt bubble in the history of mankind is on the verge of deflating and collapsing as world leaders and central bankers fly around the globe to one crisis meeting after another. No sooner is one panic quelled or some hasty band-aid fix slapped into place to stop a financial collapse, then another breaks out somewhere else. The bad news just keeps on coming;
ICELAND...Bankrupt...Oct.2008 nationalises banks; turns to International Monetary Fund for help.
BALTIC DRY INDEX...Down 90%... a leading indicator of shipping rates & global trade.
JAPAN (NIKKEI)...Down 81%... from all time high of 38,957 on December 29th 1989.
RUSSIA (RTS & MICEX)...Down 77%... exchanges shut down several days to stem panic.
CHINA (SSE)...Down 72%... from all time high of 6,029 0n October 16th 2007.
KOREA (KSE)...Down 68%... from high in May 2007.
ARGENTINA (MERVAL)...Down 64%... moves to take over $30 billion in private pension funds.
INDIA (BSE)...Down 60%... since January 2008.
TURKEY (ISE)...Down 59%... from high in November 2007.
HONG KONG (HANG SENG)...Down 55%... past 12 months.
ITALY...Down 53%... past 12 months.
BRAZIL (BOVESPA)...Down 52%... from May 2008 peak. Trading suspended 5 times in 3 weeks.
FRANCE (CAC)...Down 50%... from June 2007.
GERMANY (DAX)...Down 50%... year to date.
GREAT BRITAIN (FTSE)...Down 47%...from all time high of 6,930; now “officially” in recession.
MEXICO (IPC)...Down 47%...since June this year.
AUSTRALIA (ASX)...Down 45%... from all time high of 6,829 on November 1st 2007.
U.S.A (DJIA)... Down 46%... to 8154 on Oct.10th 2008 from 14,198 on Oct.11th 2007. Interesting that the American market (where this crisis all began) is down less than so many others...but not surprising really with the U.S. Fed prepared to monetise as much debt as necessary to avert a Financial Armageddon.
OIL...Down 54%... after peaking at $139 in June 2008. OPEC Nations hastily cut supply.
COPPER...Down 50% from July 2008 high.
NICKEL...Down 62% year to date.
GOLD...Down 26% +... from high of $1,010 on March 17th 2008.
The statistics speak for themselves. The world is undoubtedly experiencing what Alan “I made a mistake” Greenspan described as a “once in a century event”... thanks a lot for that Mr. Greenspan.
The only question now is how long might it last?
[link to freewordofgod.yuku.com] |
| .
User ID: 541425
11/3/2008 8:14 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Is the buck back?
Post a comment (14)
By: Diana Furchtgott-Roth
Tags: Uncategorized, currencies, dollar, economy, Federal Reserve
diana-furchtgott-roth1Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The opinions expressed here are her own.
“The Buck is Back,” proclaimed a Wall Street Journal headline on Tuesday. But even if it is, and that’s a big if, a strong currency is a mixed blessing.
True, in spite of the financial crisis, over the past six weeks the dollar has strengthened substantially against the euro and the British pound, although Wednesday’s half percentage point Federal Reserve rate cut caused the dollar to slip. But the dollar has lost value relative to the Japanese yen.
What’s really happening is not that the dollar is strengthening on its merits, but that European currencies are weakening.
“For the dollar to depreciate, it has to depreciate against another currency. America isn’t looking great, but Europe is looking even worse,” explains American Enterprise Institute resident fellow Desmond Lachman.
Europe’s worsening economic problems — greater than America’s — are causing some investors and the army of regular foreign exchange speculators to prefer dollar assets, what foreign exchange traders call a “flight to quality.”
Approximately 40 percent of America’s subprime loans are held abroad; the British housing market is deteriorating; the British government is bailing out the City of London’s famed banking sector; and European banks hold risky investments in slowing Eastern European economies, especially Russia.
As a result, the European Central Bank is likely to cut interest rates soon, further dimming the attractiveness of the euro, and the Bank of England may well follow suit.
Although a stronger dollar might appeal to Americans’ patriotism and pride, it will have mixed consequences. It makes exports more expensive and imports cheaper, which implies lower economic growth and a loss of jobs in export industries.
The relative weakening of European currencies versus the dollar could hurt America more than Europeans.
America’s 2.8 percent annualized second quarter GDP growth rate was supported by exports, and third quarter GDP would have declined by more than three tenths of a percent without them. As consumers reduced spending, rising exports helped employment.
With a weaker currency, Europeans will see more Americans visiting for vacations and shopping trips, and it will be easier for Europeans to sell their products in American stores for Christmas — if the recession doesn’t completely empty the stores of shoppers.
Japan, with its strong currency, is the country that may be in real trouble. With interest rates in Japan only at 0.3 percent, reduced on Friday from 0.5 percent, the Bank of Japan has little room to cut to let the yen fall against the dollar and the euro. In addition, its low interest rate makes the yen the currency of choice for hedge funds, which borrow yen and invest in euro- or dollar-denominated assets.
No wonder, then, that, shares in export-oriented Sony have fallen 68 percent this year, and that the Nikkei stock market index has declined by 56 percent.
Some, such as Encima Global President David Malpass, criticize Washington for not doing more to promote a stronger dollar. The weak dollar, according to Malpass, was one of the major causes of the financial crisis, resulting in inflation, the asset price bubbles in commodities and housing, and withdrawal of capital from America. Although America benefited from exports, this was outweighed by damage done to other sectors of the economy.
Yet with the economy in recession, the Fed won’t raise interest rates soon to strengthen the dollar. Domestic considerations trump the dollar in determining economy policy.
As the global economy works its way out of a recession, Japan, with its strong yen, has more to lose than Europe, with its weak euro. As for the buck, it is not back, but it is fine where it is.
You can contact the author at dfr@hudson.org
Best Comment
November 2nd, 2008
12:22 am EDT
Aren't the dollars off the market because European banks have had to buy dollars to cover their positions in the $55 trillion credit default swap market? I think this would explain why the dollars are scarce and the Euros are everywhere.
-Posted by Ron
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14 comments so far
October 31st, 2008
7:07 pm GMT
USD will turn to 1.46 after 1.22 against eurO if 1.2328 isn’t already bottom. Small chances are for 1.13 and then 1.3665. it’s always silly to forecast future in currenices pair but force is strong.
good lucke
- Posted by parchy
October 31st, 2008
8:53 pm GMT
Really? Europe is in worse shape than the US and that’s why the euro fell? The author cites the UK and Russia but these countries aren’t even using the euro. There are lots of reasons why the euro is weakening against USD (for example, corporate America repatriating the then-weak USD by selling foreign currencies to “window-dress” their balance sheet) but Europe being in worse shape is hardly one of them.
- Posted by TheContrarian
November 1st, 2008
8:29 am GMT
So you think the UK is in a worse state than America?
I have just been over to the states and I think personally you are on the edge of a cliff waiting to topple over.The only real jobs going seem to be in the food are taxi industry that are very low paid.I have spoke to many that can’t even think about getting a job in their given profession because they simply are not there any more so they have to take anything on offer.
The period march 2009 onwards will be the interesting time imo because all the bailouts and government intervention will have been tried by then.The new president will be in power and the bear market rally will be well behind us.This is the time when you will realise that the American people are broke and have nothing to spend themselves out of a recession or as I think could poosibly happen,a full blown depression.
Watch what happens to the price of the Dollar then???????
Your country has been living the American dream yes,but I’m afraid its been on borrowed money.You will now have to live the American nightmare if things don’t pick up soon.This is just my opinion of the outlook for the U.S economy.
- Posted by clive ling
November 1st, 2008
12:40 pm GMT
The root of the lack of financial discipline of the US dates back to August 15,1971 when President Richard Nixon disconnected the greenback from gold, because the gold-exchange standard was warning that the USA were overspending (at that time: the Vietnam’war). Had the warning been heard, the USA would not find themselves almost bankrupt. Prestige costs but is it worth?
- Posted by N.Clement, Paris,France
November 1st, 2008
7:50 pm GMT
The temporary strength of the dollar in ForEx markets is simply an artifact of a high demand for dollars because the big guns are seeking a stop-loss strategy by buying US government debt which is “guaranteed”. When this massive repatriation has played out, the dollar is likely to sink like a lead balloon, because the ForEx markets will return to normal activity. With the government “pumping liquidity” (read: printing money)as it has also been doing, the dilution of the currency’s value will only hasten the dollars decline. My money’s in New Zealand with the highest interest rates on developed countries savings accounts with a $1 million deposit guarantee. Totally liquid in a simple savings account with a guaranteed 7.6%interest.
The interest may go down some in the near term (because they are in a lowering mode) but still it will remain the best bet on the planet as far as I can tell.
- Posted by Jonathan Cole
November 1st, 2008
9:50 pm GMT
The writer has it quite wrong. This dollar pump is not possible without extensive central bank intervention. The USA is a nation issuing a currency with an $850 billion per year current account deficit. Yet, in spite of this, the currency is now in shortage all over the world? This defies common sense, unless the central bankers have created a type of derivative whereby they are paying various money center banks a nice interest interest rate, on a couple of trillion worth of dollars, to keep them off the market. Keeping this money off the market has created the shortage of dollars, and the increase in the dollar’s value. But, foreign central banks will eventually run out of appetite for costly dollar supporting activities. When the dollar pump ends, the American currency will fall very fast and hard. |
| FHL(C)
User ID: 468982
11/4/2008 12:19 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
[link to www.marketoracle.co.uk]
Epochal Transformation Accelerates as Global Financial Matrix Disintegrates
Politics / US Politics Nov 01, 2008 - 11:03 AM
By: T_Anthony_Michael
Politics
Best Financial Markets Analysis ArticleNow that the genie is out of the bottle, economic, political and social events will proceed with the inexorable force of destiny. The forthcoming changes, shifts and breaks with the past that are delineated below do concern the unsavory business of WHAT, positively, will not be brought into the future. This is of critical importance. Why? Because those who do not know, and understand, and heed history, are always, always forced to repeat it.
I. As we all sat back and waited for this year's October Surprise, please know that it came a little bit early this year on September 15 th which will forever be known as PITCH BLACK MONDAY. Actually, the entire month of October was set up to be a series of Black Monday's, as well as every other day of the week shaped up to be. It's really a good time to brace your self since this year's election cycle, and beyond, will bring with it a whole new season of surprises. Things like the beginning of the end of FIAT money – the real root cause of all our financial problems and economic ills. This foundational flaw, together with all of the multi-layered financial/economic/accounting mechanisms and schemes that have insidiously crept into the system, are the ‘not talked about' institutionalized culprits and structural deformities that really need to go. Without them, the perps wouldn't be so tempted to stack the deck against us all the time.
The only legitimate currency is that which is backed by GOLD, or some other precious commodity that is universally valued, and issued directly by the US Government, not a privately owned, organized crime syndicate like the FED. Debt driven, fractional-reserve banking – the real bane of global finance – will then be banished from the planet forever, along with the overlords of disaster capitalism, institutionalized usury & loan-sharking (e.g. World Bank & International Monetary Fund), as well as their economic hitmen. Finally, the central organizing principle of modern society, and especially Western Civilization, will no longer be: maximizing shareholders' wealth .
II. Another little surprise will come in the form of an announcement that goes something like this: The USA was conceived to be a CONSTITUTIONAL REPUBLIC , not a democracy by plutocracy . The founding fathers would be absolutely horrified to see the “ mob rule by the privileged elites” into which this once great nation has degenerated. Every political philosopher knows that democracy, when sufficiently dumbed down and unduly influenced by the moneyed ruling class, will always devolve into a despotic tyranny. Therefore, the wholesale exportation of our fraudulent notion of democracy, and its supposed freedoms (to buy, buy, buy after watching the boob tube hucksters), by the political and corporate classes must be reconsidered. And it will be soon, on a new channel during this “Fall” season's new lineup! Stay tuned ---
III. Another announcement will be made, in the not too distant future, about the business entity commonly known as the CORPORATION ** – the main huckster of this ‘brand' of faux democracy . Surely, if the devil were to ever choose the perfect form in which to enter in order to carry out his nefarious designs, Inc . is it. Is there any other entity on earth – person or party, organization or association, government or institution, jurisdiction or bureaucracy, club or group, fraternity or sorority, etc. that can function with such impunity, as it hides behind the shield of LIMITED LIABILITY. Those two words have given complete cover for the flagrant and wanton destruction of planet Earth.
You name it – oil slicked coastlines, razed rainforests, beaches strewn with dead dolphins and whales. Not to mention the complete erosion of human, civil and national rights, wherever INC decides to set up shop.
Let's pick a country. Let's go to India and visit Bhopal of Union Carbide fame. Close to 8000 people died within two weeks of that December day in 1984 in what is known as the worst industrial disaster of the last century. Now that Dow Chemical owns Union Carbide, you can only imagine the veritable phalanx of attorneys who are paid unconscionable fees to ensure proper responsibility and accountability will never be assumed by their master.
Or let's visit the Punjab and talk to the thousands of widows of farmers who committed suicide because of Monsanto's “seedless seeds”. Or go to just about anywhere on that subcontinent where a Walmart is being protested for land theft, encroachment and despoilation. Let's not forget about all the Coca Cola bottling plants that have become notorious for stealing the most precious commodity that every Indian cherishes and covets – WATER. Well, that takes care of land, water, air … and blood. What else in heaven's name do these stakeholders want?!
We all know the deal. It's the one where the individual, and his/her environment, is always trampled in favor of the corporate interest. Isn't it time to really take stock of what our current predicament has left us with. Perhaps it's also time to seriously think about actually re-ordering the ORDER, instead of once again rearranging the deck chairs on the titanic. Like we've said, “ optimizing stockholder profit ” will soon be history, as the cease and desist orders are not far from being issued to Corporate America . Might as well get a head start on dissolving (or re-chartering) that corporation.
IV. Termination of Globalization : The dominating and predatory form, that is. No other global initiative has been more unsuccessful at creating a framework for a more efficient transfer of goods and services around the planet. Truly, every aspect of this corporate inspired policy has failed miserably. Wherever it promoters trumpet its stated intention to make markets more streamlined, effective and resilient, it has done quite the opposite.
One only needs to look at the current debacle within the European Union concerning the banking, credit, and stock market breakdowns. Never has a response from the appropriate governing bodies been more disorganized, full of mixed messages and working at cross purposes with the member states. It's like watching The Three Stooges (France, Germany & Italy ) play musical chairs blindfolded with no clothes on. What an unprecedented spectacle, and in plain view for the entire world to watch! This will undoubtedly put the brakes on the concretizing of a North American Union and their planned currency – the Amero. Praise the Lord!
As a matter of fact, all of the financial unions and economic superstates (e.g. European Union; Southeast Asian Association for Regional Cooperation; Union of South American Nations) that have been created over the past many years will, by sheer necessity and desperation, be forced to re–organize themselves in the coming months and years. Even South America , which has two distinct camps that are constantly gummin' up the works for each other, will abandon their current emerging model in favor of one that enjoys complete freedom from its North American taskmaster. To their credit, they have set the bar higher than it has ever been set concerning their strongly stated desire to be free of IMF and World Bank control. Only Russia has exceeded their standards, as they had already been fleeced by the Oligarchs in what may very well be the grandest larceny of national wealth/resources in history. This, of course, was preceded by a 75 year scourge of incessant rape, pillaging and plundering by the Bolsheviks and their Western financiers & handlers. Clearly Mr. Putin will not allow a repeat of any such conduct within his borders, and the international persecution that he has suffered certainly reflects their displeasure and frustration with him. No wonder Putin is now considered a “reincarnation” of Peter the Great by his own people.
The ruinous influence of these two globalization thugs (IMF & WB) can be instantly assessed by looking at the economic calamities they caused in Argentina (1999-2002), as well as in Thailand , South Korea & Indonesia during the 1997 Asian currency crisis. Likewise, every nation in Africa that has chosen to take on their monetary yoke has only misery and war and financial oppression to show for it. Wherever these 2 scrooges show their faces, it's quite like Ebenezer himself showing up to make a house call. You know the patient will soon find himself in a pine box after all the gold fillings and rings have been removed.
We have seen this globalization scam unfold in country after country, as a ruse to steal a nation's resources, always taking from those who have, and giving to those who want it. In fact, an objective assessment of all the world's current conflicts would reveal that the vast majority are directly the result of this geo-political/commercial dynamic. The privatization of water sources/bodies/supplies/rights is perhaps the most provocative and glaring, and can be found at the root of a number of these resource wars.
Clearly the verdict has been delivered: Economies are much less vulnerable, the more locally they are positioned and the less centralized their decision-making process. This arrangement affords much greater resiliency when dealing with the vicissitudes of the marketplace. And it takes the power away from those who are insulated in ivory towers, and far from the plight of the common man. It is time for everyone on the planet to “think globally; act locally”.
V. Stock market will become extinct . There is no greater tool at the disposal of those who can, and do, manipulate the various markets than the charade of “setting up” a formal system of trading, buying and selling of anything, as exemplified by the NYSE. This is where it all happens. From devastating whole national (and regional) economies, to toppling uncooperative corporate execs, to bringing 150 year old multi-billion $$$ companies to their knees within a week's time. From triggering stockholder revolts, to propping up corporate raiders, to extorting billions from national and/or corporate treasuries. They can, and do, do it all right there on the floor .
Really, the very best example of what occurs in these speculative market exchanges is the gambling casino. In Vegas, everyone knows that the house ALWAYS wins. It never loses. Even when there is the appearance of losing, it still wins. Go figure, but it's true. Your stockbroker is not too unlike the blackjack dealer. And your financial planner is often a croupier in disguise. So, the question remains, do you honestly know what your hard earned retirement money is invested in? If not, this is a very good time to find out!!!
For those of us who have been there, we know that whether you call it an oil bourse, a commodity exchange, or a bond market, you're still playing in a game that can go against you at any time. Wipe out your earnings in a heartbeat; devour your principal in a flash. It's often been said that when he comes, “he comes like a thief in the night”. Do you still feel you know where your entire life savings is currently residing?
The derivatives market represents the single greatest threat to worldwide economic stability and financial security. It poses such great potential for financial abuse and economic devastation that the current institutional arrangements of this commercial realm have become completely unacceptable. The alarming proliferation of hedge funds, as well as the growing number and variety of derivative instruments, has reached a critical mass that is incompatible with living a financially sound life on planet Earth. Simply put, some of these instruments are so far from the street – economic reality – that they put into jeopardy all the hard work, which appears in the form of real goods and services, that is produced by any economy at any given time. This predicament signifies a CLEAR AND PRESENT DANGER to us all.
Remember – DERIVATIVES are the real megilla. Derivatives, by their very nature, can be highly radioactive, and can go nuclear any time circumstances conspire in just the right, or wrong, way. Those who control their destiny can, likewise, utilize their inherent threat as a means of conducting financial and economic terrorism anytime, anywhere completely under the radar screen. It's time for them to go. And we trust it's just a matter of execution at this point.
VI. Mass Consumerism & Perpetual Economic Growth – the Fric & Frac of our Age – are history . One need not look any further than the inside of one's own home to see the ravages of these adopted twins. They own the bedroom, the living room, the family room and all the closets. They've taken over the kitchen, the den and the garage, as well. Since their middle names are Amass and Accumulate, we can only imagine what might lay hidden in the attic, the basement and the shed.
Ever since they became the twin pillars of Kali Yuga's overarching philosophy of life, things started to really go to hell in a handbasket … or rather gilded cage. How so? What else could one expect from a political economy that demands growth , necessitates growth and extols the virtues of growth at every turn (and on every other commercial and newscast). Growth, at the expense of WHAT!! We'll tell you what – Life!
One of the most tragic parts of this ever-unfolding tragedy has been the dramatic change in the spirit of the people with whom these twins associate. The very society loses its refinement, as the culture becomes debased. Aren't so many things associated with Americana experienced as coarse, and crude, and crass? Likewise, the nation, which was once known as the “land of the free; home of the brave”, morphs into a country reviled for its unkindness, lack of compassion and cruelty. Before anyone realizes, the citizenry is easily being herded, and then stampeded, into wars and conflict of every sort and kind.
What else could be expected when the meme of consumerism is subliminally implanted at such a young and tender age, and relentlessly reinforced from cradle to grave? And, what does it really say about a society when all who belong to it are known as consumers. Kind of like little pac-men (and pac-women) gobbling up everything in sight. Starts out with BIG Macs and 24 oz cokes, then super-sized HUMMERS, then oil fields and gold mines and precious rainforests, and then whole countries.
Likewise, in the corporate realm, any board director, company officer, division president, regional director, department manager, production supervisor, etc. will candidly speak to the greatest pressure in their lives. More sales, more profit, more production, more revenue – anything that will show an increase in year over year growth. Always gotta GROW, even though yuv been out of puberty for 20 or 30 years!?
Well, you can imagine that this state of affairs can only go on for so long. As a matter of fact, this party's now over. And the hangover is about to begin. Perhaps it's time to send these twins on a permanent vacation to the waterless region .
VII. War, as a means of wealth creation, is now bankrupt. War, as a means of conflict resolution, is over. As a means to any end whatsoever, war is finished . You get the picture, don't you? War has outlived its usefulness, and has become as obsolete as the derivatives hawker. There is simply no more place for it in civil society. It's time for the curtain to fall on this show for the last time, and for all of its bad actors to hit the stage exit.
It never was a legitimate policy for conflict resolution, as we know. Virtually all conflicts and wars were manufactured in the boardrooms of the world. And impeccably stage managed by the directors of the war studios. Isn't the Iraq war a perfect example of this kind of terrible and awful-to-watch “B” movie?
Any deliberate, probing and unprejudiced analysis of all the major wars going back to the French Revolution will reveal an extraordinary degree of carefully calculated and coordinated events leading up to the actual conflagrations we call war. Just read the actual history that is only now beginning to surface, and you will reach this very same conclusion.
War has consistently served its masters in three ways which no longer have relevance in an enlightened civilization: (i) population control (ii) artificial creation of wealth for the plutocracy (iii) imposition of a tyrannical order in the wake of the chaos that always results from war. Population control in this context has different meanings. The number of people who are systematically genocided, wantonly annihilated and deliberately infected with disease agents serve the purpose of population reduction. Then there is the sheer terror of war and its effects on whole populations (see how easily controlled both the Germans and Japanese were after WWII). “Order out of chaos” is made easy when all concerned parties have been faced with the extraordinary distraction, mayhem and pandemonium that war always brings.
Let us once again proclaim, here and now, that: WAR HAS COME TO AN END .
VIII. There is a very profound and significant connection between 9/11/01 and 9/11/08 that may be difficult for many to fully embrace. But here it goes –
The OMEN that 911 truly was, looks a little bit like THE LORD OF THE RINGS .
Remember the Twin Towers ? When they came down in NYC, it was a message to humankind that the reign of the Almighty Dollar was coming to an end . As a nation's currency goes, so goes its destiny. Her financial strength and economic prowess was on the wane, and soon to be greatly diminished. Just as the WTC (financial capital of the world) was pulverized into dust, the US Dollar would be swept into the ash heap of history. Just as we see it collapsing all around us, exactly 7 years after the original 911 apocalyptic events.
When the Ring of Power was finally destroyed, like the Pentagon (ring-shaped command center of the military-industrial complex) was mortally wounded and damaged, the message was equally clear. Her military might and superior force would be reduced to rubble in the twinkling of an eye. She would, likewise, soon see the demise of Her all-pervasive state sponsored terrorism . This, because she had lost all moral ascendancy. Besides, the empire could no longer be sustained politically, financially, practically or ethically, as the seeds of its own destruction had fully sprouted. The most fatal seed grew into that extremely corrupt and predatory form of corporate, crony capitalism which was so socially unconscious, and so environmentally unaware, it was quite doomed from the very beginning.
The GOOD NEWS is that this nation – its people – will now be compelled to beat their “swords into plowshares” and their “spears into pruning hooks”.
Just as the Phoenix rose from its ashes, so too will America ascend to even greater heights. As long as She ascends with the guidance of the highest of ideals, loftiest of principles and noblest of intentions. And She reforms, and transforms Herself, in good faith, in earnest and with haste.
As a modern day prophet said in the days immediately following September 11, 2001:
“ America , Wake up ! ! ! Seize this God-given opportunity. There is no more time to dally in fear and ignorance and greed. For yours is a destiny that must serve as a beacon of Light and Hope and Peace to the world. Make haste, the time is drawing nigh!”
By T. Anthony Michael
We The People
we_the_people@fastmail.us
T. Anthony Michael is a Financial Analyst & Long Range Financial Planner.
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 468982
11/4/2008 1:06 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
[link to www.marketoracle.co.uk]
United States Heading for Economic Depression and Dollar Collapse
Economics / Economic Depression Nov 03, 2008 - 02:23 AM
By: Eric_deCarbonnel
Economics
Best Financial Markets Analysis ArticleThe US headed for a depression AND a currency collapse. Americans will see their wealth wiped out as stocks and home values plunge, their cost of living soar as food and oil prices spike up, and their taxes increase as the government struggles to fund itself. To understand where the US is heading, we need to step back and take a look at the deep problems afflicting the US economy:
Problem #1: Dependence on Foreign Debt
Over the last few decades, foreigners have been buying up an increasingly large amount of US debt, propping up the dollar. The dollar enhanced buying power has allowed America to consume a disproportionate amount of the world's resources (i.e.: 50% of the world's oil). The inflows of foreign money into the dollar has been due to its status as the world's reserve currency and the desire of exporting nations to maintain a weak currencies. Unfortunately, the dollar has lost the attributes that established it as the world's reserve currency more than 60 years ago (we are no longer a creditor nation), and exporting nations incentive to subsidize the dollar is disappearing along with consumer spending. A collapse of the dollar is imminent as foreigners stop funding America's consumption binge.
Problem #2: Massive derivative bubble
With large amounts of money flowing into dollars and looking for investments, the US financial sector took on the role of selling debt to foreign investors. In the beginning, this involved making loans to Americans and then bundling those loans into complex financial instruments (CDOs, SIVs, ABSs, etc). However, as time went on and the inflows of foreign money into dollars increased, financial institutions became reckless in their efforts to manufacture AAA products. They made loans to subprime borrowers (subprime CDOs) and used financial wizardry to create securities out of thin air (synthetic CDOs). Towards the peak of this financial greed and insanity, banks added large amounts of leverage to their exotic investment products (subprime CDOs squared and CPDOs), and built complex, highly leveraged, off-balance sheet vehicles which funded themselves with short term debt (SPVs, VIEs and SiVs). Through financial engineering and the mispricing of risk, the value of derivatives now far, FAR exceeds the amount of real assets and economic resources in the US .
Problem #3: 55 trillion CDS market
In addition to the derivative bubble, financial institutions used leverage to sell insurance on an enormous amount of debt, creating today's 55 trillion CDS (credit default swaps) market. In order to deleverage and close out their positions, CDS issuers are being forced to buy back huge quantities of insurance, driving up the cost of insuring corporate debt. The higher premiums for CDS translate as higher loan rates for companies and governments.
Problem #4: Structurally unbalance economy
The strong dollar and easy credit conditions over the last two decades have warped US economy, making it structurally unbalance. Here are a few examples of how the US economy has become unsound:
a) Oversized financial sector . While packaging US debt into exotic vehicles for foreign investors, the financial sectors grew until it earned 27% of corporate America's total profits. As credit crisis causes our oversized financial sector disintegrates , it leaves a gapping whole in the economy.
b) Automakers dependent on cheap gas. Automakers are heavily invested in producing fuel guzzling cars and SUVs. When the dollar's collapse pushes oil back up over $100, a large part of America's automobile industry will shut down and cease to exists.
c) Leveraged Stock Buybacks . Taking advantage of low interest rates, companies like GE issued large amounts of debt (commercial paper or corporate bonds) to fund share buybacks to juice profits and prop up stock prices. These companies are now having to roll over all that debt in a tightening credit market while consumer spending goes off a cliff, and their odds of long term survival are not good.
d) Outsourced manufacturing . In order to cut costs, companies have outsourced large parts of their manufacturing operations to lower cost labor markets overseas. Unfortunately, as the dollar collapses, the cost of oversea labor will increase in dollar terms, dealing a crushing blow to companies whose primary market is in the US.
Without a continuously increasing inflow of foreign money to keep the dollar strong and interest rates low, the US economy will disintegrate.
Problem #5: Bankrupt consumer
The "resilient consumer" is dead. His wealth has been wiped out by deflating home and stock prices. Outsourcing and competition with cheap oversea labor have prevented his salary from keeping up with the cost of living. Tightening credit is limiting his ability to borrow, and his liability as a taxpayer has reached $516,348 per household. With hundreds of thousands in job cuts in the pipeline and America's middle class already sinking into poverty, consumer spending is heading over a cliff.
The Financial Apocalypse
As it becomes obvious that consumer spending will not to pick up and that US will never be able to repay its mountain of debts, investors will begin dumping dollars. The selling of dollar holdings to transfer the money to gold or other currencies will accelerate the collapse of US assets prices. With the deflationary/dollar collapse worsening, a large part of corporate America will become insolvent. Automakers are bankrupt at +5 dollar gas. Companies who outsourced their manufacturing and whose primary market is the US will face bankruptcy. Companies who used excessive amounts of debt for stock buybacks will go bankrupt. Financial institutions will be wiped out by the crashing value of the assets in their balance sheets. As a result of the massive economic dislocation, unemployment will soar. With the falling dollar, oil and food prices will move higher in US dollars despite slowing worldwide demand. I am not sure how the government will react to all these problems, but it will be hugely inflationary and it will accelerate the dollar's collapse…
I believe the US is on the verge of a downward spiral that will rapidly intensify into an economic collapse the likes of which has not been seen in modern economic history . I advise buying gold and keeping a close eye on the yield of long term treasuries. If the yield on the 10-year note goes up while stocks fall, it will be a sign that confidence in government debt and the dollar is failing.
By Eric deCarbonnel
[link to www.marketskeptics.com]
Eric is the Editor of Market Skeptics
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11/5/2008 8:08 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Great American Housing Market Nightmare Next Phase
Housing-Market / US Housing Nov 04, 2008 - 07:07 AM
By: Money_and_Markets
Housing-Market
Diamond Rated - Best Financial Markets Analysis ArticleMartin Weiss writes: One of the greatest blunders of our time is made by those who blindly assume home prices are so low they couldn't possibly go any lower.
In reality, home prices don't stop going down at some particular level that appears to be “cheap.” Nor do they stop falling because they match some historical price that was previously a low.
The end of the decline in home prices will come only when there are no new economic forces driving them down.
When will that be? I'd love to say it's just around the corner. But everything I see tells me that, despite the sharp declines already recorded, a steeper plunge in home values is dead ahead.
The reason: So far, most of the troubles in the housing market have been caused by bad mortgages going sour. Meanwhile,
* the more common causes of housing slumps — high interest rates, rising unemployment, and recession — are just starting to kick in. And …
* the most powerful causes — depression and deflation — are still on the horizon.
In the 1920s, my father (left) and uncles never dreamed of borrowing to buy a home. Home mortgages were rare.
In the 1920s, my father (left) and uncles never dreamed of borrowing to buy a home. Home mortgages were rare.
In the boom leading up to the Great Depression of the 1930s, most Americans did not borrow money to buy a home. Variable rate mortgages didn't exist. And Wall Street investors rarely got involved in the business of financing homes. Home prices did fall dramatically. But those price declines came mostly after the stock market crashed, after the economy shrunk and after millions of workers had lost their jobs.
The crux of the problem today: That phase of the housing crisis still lies ahead. Moreover, this time, because of massive debts, the pressure to abandon or sell homes is far greater.
Conclusion: If the U.S. sinks into a depression, home price declines could be as deep as, or deeper than, those of the Great Depression, especially in the hardest hit regions of the country.
It is a frightening thought. Yet, on the positive side, a sharply reduced price for the average home is the only fundamental, enduring mechanism for making homes more affordable and restoring demand — especially if the days of easy credit are gone.
Already, in 2008, one in ten American homeowners has defaulted on their mortgage or lost their home in foreclosure. Nearly four in ten owe more than their home is worth.
And all this is before the recession deepens and before we experience the next phase of the Great American Housing Nightmare.
Why This Was One of the Biggest Speculative Manias of All Time
The Great American Housing Nightmare has no precedent; no historical roadmap to guide you, no proven pathway to follow.
No one can tell you with precision how far U.S. home prices will decline, when they will hit bottom, how many homeowners will lose their homes, or how soon a real recovery will begin. Getting to a recovery could take many years.
In fact, to throw some light on the speculative frenzy and panic that have swept through the U.S. housing market, the most relevant precedents I could find have nothing to do with homes at all. They are the Dutch speculative mania of the 1630s, the South Sea Bubble of the 1700s and the stock market panics of the early 1900s.
In those boom-and-bust episodes, the objects of speculation were tulips, slaves and stocks. This time, it was the American home. But despite that key difference, the critical boom-bust elements that helped create the speculation — and the depth of the losses which ensued — were roughly similar.
Boom-Bust Element #1: Debt
Debt is the fuel of speculation. Without it, speculative bubbles cannot emerge. With it, prices can be inflated beyond the wildest imagination.
In seventeenth century Holland, investors speculated wildly on tulips, putting up as little as 2.5% of their own cash. Similarly, in early 20th century stock market booms, investors put up as little as 10% of their own money, using borrowed funds for up to 90% of their purchases.
But in many respects, the borrowing mania that created the Great American Housing Nightmare makes all previous debt manias pale by comparison.
By mid-year 2008, the Federal Reserve reported a grand total of $14.8 trillion in U.S. mortgages outstanding — 40% more than the entire national debt and triple the total of all the mortgages in America just a dozen years earlier.
Sadly, it was not just the supersized quantity of debt that was so dangerous. Even more dangerous was the substandard quality of the debt. Consider the facts:
Bullet In all prior speculative bubbles in history, investors were required to put up at least some of their own money to buy into the boom. Even in the tech stock mania of the early 2000s, investors had to put up a minimum of 50% cash for their stock purchases.
But in the frenzy that preceded the Great American Housing Nightmare, millions of Americans bought homes with zero money down!
Lenders didn't merely look the other way while home owners borrowed the down payment; they actively encouraged it. Homebuyers without enough cash to buy a $500 TV set were declared the proud new owners of $500,000 luxury homes. Many took it one step further with serial purchases of homes, leapfrogging with glee from one free ride to the next.
Bullet In all prior speculative bubbles, borrowers were invariably required to make payments of interest and principal in full and without fail, with zero tolerance for any other arrangement.
In contrast, during the Great American Housing Nightmare, millions of homeowners were allowed to pay interest only or even less than full interest.
So it should come as no surprise that the majority opted to make the smallest payments allowed, while the lender added the unpaid amounts to the loan balance. As with credit cards, the more that time went by, the deeper into debt the borrowers fell.
Bullet In prior historical episodes of rampant speculation, loans were almost invariably held by the lenders, who, in turn, had a vested interest in making sure the borrower's finances were sound and their payments were kept current.
But in the Great American Housing Nightmare, the mortgages were mostly held by non-lenders — institutions and investors that were far removed from the borrowers.
Bullet In earlier manias, investors speculating with borrowed funds were required to document that they were worthy of the loans. They invariably had to present hard evidence of income, proof of assets, or both.
But in the Great American Housing Nightmare, even that was not the case. Millions were allowed to borrow huge sums without a scintilla of proof that they had the wherewithal to make the payments.
Bullet In earlier manias, the bubble was generally confined primarily to one debt sector.
Not this time around! Beyond the $14.8 trillion in residential and commercial mortgages in America, there are another $20.4 trillion in consumer and corporate debts. This meant that mortgages represent only 42% of the private-sector debt problem in the country.
Result: Americans are not only under tremendous pressure to sell their homes due to burdensome mortgages, they are also squeezed by huge credit card balances and by layoffs from employers equally addicted to debt.
By virtually every measure, the debts piled up prior to the Great American Housing Nightmare are far bigger and worse than any debt pile-up ever witnessed in history.
Boom-Bust Element #2: Investor Frenzy
Gouda Tulip Bulbs
South Sea Co. Shares
In 1637, at the height of the tulip mania, just one Semper Augustus bulb changed hands for 12 acres of land. Another bulb was sold for a massive collection of goods, including 160 bushels of wheat, 160 bushels of rye, four oxen, twelve swine, two hogsheds of wine, four casks of beer, two tons of butter, 1,000 pounds of cheese and more. But just a few months later, similar bulbs were practically worthless.
In 1720, investors drove up shares in the South Sea Company from 125 to 960 in six months and back down again to 180 in less than three months.
In 1929, the Dow Jones Industrials surged from 213 in 1928 to 381 in 1929, only fall to 41 in 1932.
In each case, investors and speculators — most with little experience in the market — were caught up in a wild buying frenzy, only to dump nearly everything in an even wilder selling panic.
Unfortunately, we witnessed a similar pattern prior to the Great American Housing Nightmare. As the buying frenzy heated up, homes and condos were flipped faster than hotcakes. Prices were driven through the roof. And even mortgages themselves were transformed into securities that were riskier than some of the riskiest stocks in the world.
At the peak of the housing bubble, the average price of existing home reached nearly five times the total yearly income of its owners, the highest in history. At the same time, the affordability of each home plunged to its lowest level in history.
Once set in motion, the speculative fever spread quickly. From Miami to Phoenix to San Diego to Las Vegas, investors camped outside housing developments to snap up three, four, five, or more units at a time. Condominium developers built gleaming towers in major cities, based almost exclusively on anticipated bids from investors and speculators and with no evidence of real underlying demand. From coast to coast, investors signed on to millions of pre-construction contracts, only to flip them before the first shovels touched the ground.
This kind of speculation was traditionally just a small niche in the giant U.S. housing market. But at the peak of the housing boom, it nearly took over: An astounding 40% of houses and condos were bought as second homes or investments. The yearly rate of appreciation on existing homes catapulted from 3.6% in January 2001 to 16.6% in November 2005. On new homes, meanwhile, it surged from 4.8% in to 18.1%.
Fueling the bubble, government agencies like Ginnie Mae, government-sponsored enterprises like Fannie Mae and Freddie Mac, and private investment banks bundled up mortgages and resold them as securities that could be traded much like stocks and bonds. These securities, in turn, were bought by banks and investors in the U.S., Europe and Asia. The total amount of mortgages transformed into these securities: $4.8 trillion, 60% more than the total value of all the stocks in the Dow Jones Industrial Average.
In just one year — 2006 — $2.4 trillion in new mortgage-backed securities were created, more than triple the amount of just six years prior. Even in past investment manias, there was no such structure. Even the wild and wooly speculators of the 1600s, 1700s and the early 1900s did not take the madness to that extreme.
Boom-Bust Element #3: Government-Created Monopolies, Corruption, Fraud and Cover-Ups
Some of the largest speculative bubbles of all time were born out of government-sponsored monopolies, nurtured by government-bred bureaucrats and kept alive beyond their time by government-inspired corruption, fraud and cover-ups.
In the South Sea Bubble of 1711, the English government needed to find a way to fund the huge debts it had incurred in the War of Spanish Succession. So the Lord Treasurer, Robert Harley, created the South Sea Trading company to help finance the government's debts. The company got exclusive trading rights in the South Atlantic plus a perpetual government annuity of over a half million pounds per year. In exchange, its investors agreed to assume responsibility for about £10 million of the government's debt.
It seemed like a win-win. But the government's sponsorship and the company's monopoly led to big trouble. The company's managers, thinking they had the government's largesse to fall back on, were complacent and ignored signs of economic troubles. They took excessive risk. And ultimately, investigations turned up massive fraud at the company and pervasive corruption in the government.
When the entire structure collapsed, there was nothing the government could do except to pass what later become known as the “Bubble Act” aimed to prevent a future recurrence.
Similarly, in the early 1900s, the Panic of 1901 occurred in the wake of a failed attempt to create a massive railroad monopoly; the Panic of 1907 followed a failed attempt to corner the copper market; and the Crash of 1929 resulted, to a large degree, from collusion among brokers, bankers and tycoons.
In nearly every case, the government gave select companies or individuals special privileges, waived critical regulations and encouraged great concentration of power. And in nearly every case, the government made desperate attempts to salvage the boom long after the bust began. But it was ultimately powerless to avert a collapse in the very structures it had helped to create.
Unfortunately, the same, or worse, could happen in the Great American Housing Bubble: The U.S. government created two monopolies that made England's eighteenth century South Sea Company and America's twentieth century industrial monopolies look small by comparison. Their names: Fannie Mae and Freddie Mac.
The U.S. Government gave these companies monopolistic control over America's largest debt market — mortgages. And then, beginning in the early 2000s, the government spurred these monopolies to compete aggressively with private subprime lenders.
Not surprisingly, the results were similar to those of earlier bubbles: Extreme complacency, excessive risk-taking, and, ultimately, fraud.
In September 2004, the Office of Federal Housing Enterprise (OFHE), Fannie's and Freddie's primary regulator, issued a special report revealing massive accounting irregularities. And four years later, in September 2008, the companies had still not cleaned up their act, prompting the Securities and Exchange Commission to launch new investigations into accounting deceptions.
The biggest deception of all: In their official filings and public pronouncements this year, Fannie and Freddie consistently and wildly overstated their capital, while understating their risk. Supposedly built with mortar and steel, Fannie and Freddie were actually houses of cards in disguise.
Repeatedly, the company executives swore on oath that they had more than enough capital. And even on the eve of their demise, their regulators testified before Congress that the companies were solvent.
Based on their smoke-and-mirrors accounting, perhaps. But based on the basic rules that you and I must abide by, not even close. For longer than anyone cared to admit, Fannie and Freddie had been insolvent. Meanwhile, their chief executives hid behind carefully camouflaged facade, marched into riskier corners of the mortgage market, and trashed the trust of millions of Americans with no sign of restraint and little expression of regret.
Between 2005 and 2008, for example, Fannie Mae purchased or guaranteed at least $270 billion in subprime mortgages — high-fee loans to high-risk borrowers. That was more than three times as much as it had bought in all its earlier years combined.
Yet no one seemed to bat an eyelash.
Quite the contrary, Wall Street and Washington cheered loudly, encouraging them to take on even more risk.
Why such enthusiasm? Because the rapid growth in fees supercharged Fannie's stock price. Because big revenues meant huge bonuses for executives — $90 million for one, $30.8 million for another, and $10 million for a third. And because the easy money flowing to unqualified borrowers indirectly helped politicians buy millions of votes.
Suddenly, however, in September 2008, it was finally recognized that all the financial statements and all the sworn testimony about solvency were unabashed lies. Suddenly, the two largest mortgage lenders on earth, supposedly rich and prosperous, were thoroughly bankrupt. And suddenly, underscoring the depth of their demise, each company needed an unprecedented $100 billion injection of government funds just to keep it alive.
The potential bill to taxpayers: $200 billion. But that figure assumes an end to the credit crunch, no more debt collapses, no recession, and certainly no depression. If any of these assumptions should prove wrong, $200 billion will barely cover what is fast becoming history's largest cesspool of sinking debts and commitments — $5.2 trillion in mortgages guaranteed or owned by the two companies, their $1.5 trillion in debts, and their $2 trillion in derivatives.
Boom-Bust Element #4: Collapse!
How much could home prices ultimately decline in the Great American Housing Nightmare? We have no way of knowing with certainty. But we can draw some lessons from similar bubbles and crashes throughout history:
* In the Dutch Tulip Mania, investors lost nearly all of their money if they bought for cash; more than all of their money if they bought on the slim margin of just 2.5%.
* In the South Sea Bubble, the cost of the shares investors bought fell from a peak of 1,000 to less than 100, a loss of 90% or more.
* In the Crash of 1929 and the ensuing 3-year bear market, investors lost 89% of their money even in America's largest industrial stocks.
* In the tech wreck of 2000-2002, when a myriad of Internet and technology companies collapsed, investors lost 78% of their money invested in the average Nasdaq stock; and 100% in companies that went under.
* In Japan's long bear market, which stretches from 1990 to the present, investors have lost 82% of their money from peak to trough in companies that make up the Nikkei average, and much more in smaller companies.
* And in the financial crisis of 2008, investors lost 99% or more of their money in some of America's most respected financial institutions.
My argument: The speculative bubble in U.S. homes is as extreme as each of these historic examples; and in the most hard-hit regions, the resulting price collapse could be equally extreme. Indeed, the Great American Housing Nightmare is progressing in three phases:
Phase 1. The bust in the subprime mortgage market. This is now history.
Phase 2. A severe U.S. recession. As of this writing, this phase is just beginning.
Phase 3. Depression and deflation. Still ahead.
Therefore, no matter how far home prices in your area have already fallen and no matter how cheap they may appear, they could still fall a lot further.
In the hardest hit regions, an individual home that was once priced for $400,000 at its peak could fall to as low as $200,000 by the end of Phase 1. But don't blindly assume that's the bottom. In Phase 2, it could fall in half again, to $100,000. And in Phase 3, it could fall by at least half for a third time, to as low as $50,000 or $40,000.
Homes with peak prices of $1 million could sell for as little as $100,000; some, originally priced for $10 million may have no buyers at all — even with asking prices as low as $1 million.
Nationwide, the median home price will not fall nearly that far. But that factoid alone will do nothing for homeowners in bubble areas like Florida, Nevada or California. Nor will it help those in blighted regions where factories are closed and unemployment rises far above the national average.
Never before in history have we witnessed home price declines of this magnitude! But that fact alone does not make them implausible, let alone impossible.
Remember: Never before in history has so much debt, speculation, government manipulation, fraud, corruption and consumer abuse been heaped onto any housing market! And if there's one thing that history teaches us, it's that unprecedented causes lead to unprecedented consequences.
Lessons To Learn Now Before It's Too Late
Lesson #1. Don't blame yourself. Virtually every realtor and expert in America told you that investing in homes was a “sure bet”; and any lender in the country that accepted your loan application was, in effect, telling you that you had the means to make the payments.
Lesson #2. Don't look back. Forget what your property was worth at its peak. And try to forget what you paid for it as well. That's water under the bridge. Instead, look at what's happening today — in the headlines, in your neighborhood, at companies in your area.
Lesson #3. Don't count on the government to save the day. There are bound to be a series of public programs to help some people some of the time. But they will be spotty; they won't turn the housing market around; and you may not qualify. For example, the FHASecure program rolled out in late 2007 essentially created three classes of homeowners with mortgages:
* Homeowners current on their mortgages and not at risk of foreclosure were mostly not eligible for federal assistance;
* Those already in foreclosure were also not eligible; and …
* Ironically, only home owners falling behind in their mortgage payments could get government help.
Not only did that make it very difficult for most people to qualify, but it also gave a strong incentive to households to deliberately fall behind on their mortgages. People asked: “ Why should I cut my food budget or give up on my nights out when my neighbor is having all the fun, skipping his mortgage payments and getting rewarded by the government for his imprudent behavior?”
Ultimately, these kinds of government programs are fundamentally flawed and doomed to fail.
The most important lesson of all: Don't underestimate the potential depth, speed and duration of the decline. As the debts are unraveled, the economy comes unglued and the deceptions are uncovered, home prices could continue to plunge much further.
If you are able and willing to sell your properties, do so now. Don't wait.
Good luck and God bless!
Martin
This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit [link to www.moneyandmarkets.com] . |
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11/5/2008 8:37 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Stock Market Unrelenting Bullishness Amidst Deteriorating Economic Conditions
Stock-Markets / Stocks Bear Market Nov 04, 2008 - 08:38 AM
By: Mike_Shedlock
Stock-Markets
Best Financial Markets Analysis ArticleMarketWatch, the Wall Street Journal, Hussman, MSNBC, and Barron's are all bullish on the stock market. That is pretty amazing optimism in the face of the collapse we have seen. Is such optimism warranted? Let's take a look and see.
The Wall Street Journal is reporting Stocks Look Cheap World-Wide .
World-wide, stock valuations have fallen to a level roughly equivalent to the one that prevailed during the 1970s, according to Citigroup. As of Thursday, global stocks were trading at roughly 10.3 times their earnings for the previous 12 months, even lower than the average of 11.4 through the 1970s.
The selloff has been especially savage in emerging markets. Earlier this week, investors drove down stocks in such markets to valuations that were almost as low as those during the nadir of the Asian crisis in the late 1990s, according to a Merrill Lynch report.
"There are a host of things that have sold off to extraordinarily ridiculous levels," says Uri Landesman, a senior portfolio manager at ING Investment Management in New York. "The baby and all its diapers and onesies were thrown out with the bathwater."
Indian shares, which last September traded at about 25 times the previous 12 months' earnings, now trade at just over 10 times, using Citigroup and MSCI figures. Shares of Chinese companies open to foreign investors are down to about nine times, from 27 times. And Russian shares are trading at about 4.4 times prior earnings, from 13 times.
"Everything looks cheap," says Ronald Frashure, co-chief investment officer of Acadian Asset Management in Boston. That is, "unless the world is going into something like the Great Depression, and we think there's a low probability of that occurring."
Historically Cheap Amid Volatility
MSNBC is reporting Stocks seen as historically cheap amid volatility .
Analysts and money managers agree that unusually sharp volatility and a freeze in credit markets have made it more difficult than ever to forecast a market bottom.
But many of them also say it's clear that stocks are a bargain at current prices, and poised to climb over the long run, even if they zigzag short-term. If third-quarter earnings end up coming in below Wall Street's expectations, some analysts still see room for stocks to gain.
"Any way you slice it, stocks will be either extremely cheap, or cheap, or just average," said Art Hogan, chief market strategist at Jefferies & Co.
The high price of panic
MarketWatch warns about The high price of panic .
If you didn't see the market's meltdown coming, you have plenty of company. If you're selling now, it's probably too late. For a longer-term, retirement-focused shareholder -- and that's most of us -- selling stocks just because they could fall further not only locks in losses, but also makes it less likely that you'll participate in powerful market rallies. Missing those days can be hazardous to your wealth.
Hazardous To Your Wealth
It is stunning how ass backwards MarketWatch has things. Participating in those rallies is what is hazardous for your health because the biggest rallies are in bear markets. There were two 10% rallies in October yet the month finished down 15%. Any long term investor who caught both of them lost money.
A Sunnier Season
The cover story of Barron's is called A Sunnier Season .
IT MUST REALLY TAKE A LOT TO SCARE AMERICA'S money managers. The Dow Jones Industrial Average is down by 30%. Credit is near-impossible to get. A global recession looms, and the cost to clean up Wall Street's mess is climbing into the trillions. And yet, against these odds, 50% of the investment pros responding to our latest Big Money poll say they're bullish or very bullish about the stock market's prospects through the middle of next year.
Barron's latest Big Money poll reveals unrelenting bullishness among many money managers, despite their pronostications for a "contagious" recession and punk profits through 2009.
NOW THAT STOCKS HAVE tumbled to five-year lows, 62% of Big Money respondents say they're undervalued, up from 55% last spring. A scant 7% think equities are overvalued at today's levels. Almost 70% say stocks will be the best-performing asset class in 2009, compared with 13% who favor cash, and 11% who prefer bonds.
"A lot of money is on the sidelines," says David C. Hartzell, founder of Cornell Capital Management in Buffalo, N.Y., which handles about $50 million. "But if you're a money manager, you can't afford to be out of the market, because you might miss the comeback."
Sideline Cash Nonsense
There's that sideline cash nonsense again. Sideline cash does not come into the market except at IPO time. Otherwise there is a seller for every buyer. If someone buys $50 million of Microsoft with "sideline cash" someone else will have $50 million in "sideline cash" to buy stocks with. I remain amazed at the number of people who manage money that do not know how the stock market even works.
Reasonably Undervalued
In Risk Management and Hooke's Law Hussman makes a case for gradually building an investment exposure.
Though I continue to view stocks as reasonably undervalued, I'm a bit concerned that so many investors appear to be looking for a bottom. The S&P 500 currently reflects the best valuations since the 1990 bear market low. We aren't trying to catch a rally – we are gradually building an investment exposure based on valuations.
My view is that the market is undervalued, that it is priced to deliver attractive long-term returns, and that there is an increasing likelihood of a major bear market advance – but I don't believe that any of this puts a “floor” below the market in the very short term, and I don't believe markets are apt to bottom while everyone is still looking for a bottom.
As an economist, it's clear that the parallels to 1929 are terribly overblown, not least because unlike the Great Depression, governments in this instance have opened a floodgate of liquidity, capital and base money – which they failed to do back then. Even if we were to completely zero out two solid years of earnings for the S&P 500, the fact is that more than 90% of the value of U.S. stocks would reside in the cash flows beyond that point. The main issue for good, established companies here is not the risk to the long-term stream of cash flows, but to what extent the uncertainty about the coming year or two of earnings will frighten investors to sell at depressed prices (thereby pricing stocks to deliver even higher long-term returns).
Of the above articles, only Hussman presented a thorough case worth discussing. That said, I disagree with his thesis. Should the S&P drop to 600 (and I think it will) that is approximately a 40% drop from here. Such a drop is worth avoiding no matter how many 10% rallies there are along the way.
I laid my thesis for the S&P falling to 600 or lower in S&P 500 Crash Count Compared To Nikkei Index . Here is the pertinent snip about fundamentals, see the article for the technicals.
S&P 500 Fundamentals
* The period from 2003 to 2008 was the biggest credit bubble in history, not just in the US but worldwide. It is unrealistic to expect the bust to be anything other than the biggest credit bust in history.
* Unemployment is 6.1% and rising. My unemployment target is 8% for 2009 and continuing higher into 2010.Think what rising unemployment will do to foreclosures, defaults on credit cards, bankruptcies, commercial real estate, and corporate earnings.
* Banks and brokerages made immense profits being leveraged 30-1 to 50-1. However, brokerages are now under control of the Fed. Leverage is still unwinding and will be lowered to 10-1 or possibly lower. Reduced leveraged means less risk, but also reduced lower profit opportunity.
* Boomers are heading into retirement, and a portion of their retirement plan (rising home prices) has been wiped out. Another portion of boomer retirement plans are being wiped out in the stock market crash.
* As a result of the above, those boomers will be doing less spending and more savings. Don't expect retail sales or store profits to come soaring back anytime soon.
* Peak Credit has been reached and a secular shift to frugality and risk aversion has begun.
* Stock markets returning from extreme conditions do not just drop to the trendline, they overshoot it.
* Children who have seen their parents wiped out in bankruptcy or foreclosed on are going to have a completely different attitude towards debt than their reckless parents did. Expect to see more frugality from parents and their children alike.
It is impossible to predict the future of course, but fundamentally as well as technically there is every reason to believe lower lows are coming, and the rebound off those lows will be anemic compared to past recoveries. Those looking for an L shaped recession are likely looking the right direction.
With so much "Unrelenting Bullishness" in the face of deteriorating economic conditions and a global economy that is clearly in recession, I simply do not see the earnings projections for 2009 holding up. Nor do I see bullish market psychology coming back.
And while there may not be another great depression, the similarities between 2008 and 1929 are massive. Inquiring minds may wish to review a Crash Course For Bernanke for a comparison.
A massive secular shift in time preference away from risk is now underway. That pendulum has a long way to go before it hits an opposite extreme in the other direction. In my view, bulls are missing the implications of this secular shift.
By Mike "Mish" Shedlock
[link to globaleconomicanalysis.blogspot.com]
Click Here To Scroll Thru My Recent Post List
Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.
I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.
When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com . |
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User ID: 543539
11/5/2008 8:57 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Global recession has begun
Post a comment (7)
By: John Kemp
Tags: Uncategorized, John Kemp, recession, The Great Debate
John Kemp — John Kemp is a Reuters columnist. The opinions expressed are his own –
LONDON (Reuters) - Yesterday’s bleak reports on the state of U.S and European manufacturing confirmed that a global recession has already begun.
The Institute of Supply Management (ISM)’s composite business activity indicator plunged for the second month to 38.9 - far below the 50-point threshold dividing expanding activity from a contraction, and the lowest level since September 1982 (see chart https://customers.reuters.com/d/graphics /US_ISM1108.gif).
The 11-point plunge in the index over the last three months (August-October) has been equaled on only four occasions since 1945 (1949-50, 1959-60, 1974 and 1980-81).
It dispels any remaining doubt that the United States has already entered recession - which the National Bureau of Economic Research (NBER) defines as “a significant decline in economic activity, spread across the economy, lasting more than a few months”.
The economy has been in trouble for more than a year. Manufacturing output peaked in July 2007 and had fallen 2.3 percent by August 2008 according to estimates published by the Federal Reserve. Private sector jobs peaked in November and were down 0.7 percent by August.
Repeat claims for unemployment insurance had risen almost 1 million over this period, and the number of people in desperate poverty receiving help under the federal government’s Aid to Families with Dependent Children (food stamp) program surged almost 2.5 million.
But until the last two months, problems had been largely confined to the motor manufacturing and construction sectors. While production of cars and light trucks declined 28 percent between July 2007 and August 2008, output of other durable items intended to last at three years or more actually rose, albeit by a marginal 0.4 percent.
Nonfarm businesses eliminated 815,000 positions on a net basis between November 2007 and August 2008. But most job losses were recorded in construction (-360,000) and motor manufacturing (-105,000) with fairly modest losses spread across the rest of the manufacturing and service industries (-349,000).
THE DOWNTURN SPREADS
In the last two months, however, the downturn has widened to the rest of the economy as growing financial turmoil and a darkening outlook have caused households and businesses to prepare for a long and deep slump by retrenching.
Retail sales have fallen in each of the last three months (July-September). But the Census Bureau measures sales in cash terms rather than by volume, so the headline numbers tend to be distorted by changes in the price of gasoline, as well as financing programs and deep discounting designed to shift auto inventories.
A better guide to the underlying strength of the consumer sector is “core sales” of items other than autos and gasoline. Core sales fell in both August and September, the largest cumulative decline since the immediate aftermath of the attacks on the World Trade Center and Pentagon, the first consecutive monthly decline in more than a decade.
Core sales have risen on average just -0.12 percent in each of the last 12 months. Since even core inflation has been running faster than this, sales volumes have been flat or falling for a year. But the pace of decline has accelerated sharply in recent weeks.
Slowing consumer spending and business investment is now working through to falling output. Manufacturing production slumped in September (-2.7 percent) and for the first time losses were concentrated outside motor manufacturing (-3.0 percent) as producers responded to falling orders by slashing output to prevent a build up of unsold inventory.
ISM reports that 46 percent of survey respondents reduced production and 40 percent cut employment last month. Even so, 52 per cent of manufacturers reported a fall in new orders and 50 percent reported shrinking order books.
The pace of job losses picked up sharply in September, with private-sector employers eliminating 168,000 positions (net basis) and most of the job cuts coming from industries other than construction and autos (-115,000). The market is braced for a further big fall in nonfarm employment when data for October is published on Friday.
The downturn is now spreading internationally. Purchasing surveys show declines in output, orders and employment in all three of the major eurozone economies last month. The European Commission has already accepted that the eurozone economy is in recession.
In the United Kingdom, with its construction and financial-services dependent economy, real gross domestic product fell 0.5 percent during Q3. Japan’s economy was already shrinking in Q2 and the slide looks set to intensify during Q3, with the purchasing index falling further and further into negative territory.
The main bright spot in an otherwise gloomy picture is continued growth in China and some of the other emerging economies of Asia and the Middle East. But even here, there are signs that export-led economies are slowing as the recession hits their main customer-base in North America and Western Europe.
INFLATION RETREATS
The other bright spot is a sharp reduction in inflationary pressure as the price of energy and other raw materials pulls back sharply from the summer’s highs. For the first time since October 2006, the ISM’s survey found more commodities declining in price (12) than rising (5) last month (see chart https://customers.reuters.com/d/graphics /ISM_CMD1108.gif). ISM reported widespread falls in the price of energy (diesel and natural gas), steel (stainless and cold-rolled coil), and base metals (aluminum, nickel, zinc and copper products).
Falling commodity prices will ease some upward pressure on manufacturing and transportation costs, and relieve the squeeze on margins. But it is unlikely to provide a substantial cushion for corporate cash flows amid a steep fall in demand, and further substantial reductions in output and employment appear inevitable in the next 3-6 months, intensifying the recessionary dynamic.
The swift turn in the business cycle has banished fears of inflation and enabled central banks to focus policy on supporting the banking system and restarting growth. The global rate cycle has clearly peaked, with rate reductions in the last month across the United States, Canada, Eurozone, United Kingdom, Japan, Switzerland, Australia, New Zealand and China.
But with the massive overhang of debt inherited from the boom years (especially in the United States and the Anglo-Saxon economies), bank balance sheets severely impaired, and extreme uncertainty about the outlook, demand for credit and lending activity looks set to remain weak, despite reductions in policy rates.
A broad-based recession has already begun across the advanced industrial economies which looks set to be the worst since 1980-81, if not 1945. Sharply falling demand for energy and other raw materials used in manufacturing and construction has already pushed most markets from oil and refined products to steel, copper, aluminum, nickel and ocean freight into surplus.
For the next 18 months, commodity markets will be shaped by an environment of weak demand and incipient surpluses.
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7 comments so far
November 4th, 2008
9:24 pm GMT
enough doom and gloom..we already know the us was in recession..defined as two quarters of negative growth even though mccain failed to recognize the facts.
lets review over 7 fed rate cuts with the current rate at 1%.all of the g7 nations cut rates.250 billion approved by congress and used to add to bank financial statements greenspan stated this was enough.the commercial paper mk thawing and rates are down.a new and ligimately elected president with a democratic congress.
all on the same page not like the republicans. housing prices falling 20% and now banks realize better to refi exisiting homeowners than take the homes away and let them sit on the mkt.
nationalized industries and banks cutting back on consumer credit so no more over borrowing.china,japan,the eu are all on the same page working in unison to propel their economies upward.the first month of real estate sales went up in september.the homebuilders and the gov moving towards the green economy…more energy efficiancy and creating 5 million green jobs.less than i million jobs lost in the year 2008.
with the current shake out americans will not spend like druken sailers americans will become more cautious with their money. women will start to expect less..smaller homes,less disposable income,less going out every friday and saturday,more sex to keep their husbands,,less spent on credit cards more spent on thrift stores.no more suvs smaller more energy efficiant cars.no more second cars
public transportant will become the norm.a contraction in the american lifestyle amercans consume 23% of the worlds energy with only 10% of the worlds people.this will become more balanced.
- Posted by economic guy
November 4th, 2008
10:04 pm GMT
The idea that inflation is falling, is absurd, because the whole concept as it is generally understood in modern economics is poorly conceived. Prices falling does not necessarily equal lower inflation. It is more like deflation which is the serious aftermath of speculative bubbles. The fact is that energy prices are still up a huge amount over what they would have been if a steady rise in price of say 3% annually had been occurring.
These costs to the economy are a direct windfall to the petroleum industry and speculators who are in position to move markets.
What we are experiencing in this extremely volatile whipsawing economy is the last of the grand larceny against the hundreds of millions of ordinary citizens, municipalities and investors by financial criminals in league with their politician friends.
The many trillions of dollars that have been removed from all asset classes have simply switched from one pocket to another. Namely the guileless ordinary citizens losses are the gains of a few big-time insiders.
This is the lesson of not impeaching clearly criminal behavior in government. You get no end to the audacity of greed and criminality. If the leaders are crooks then their sycophants are crooks and it filters down through society.
This is why the founders of this nation made a clear path for removing leadership engaged in criminal activity, misfeasance and malfeasance. But our political system has been bought by the very forces they were supposed to protect us from. By not doing their duty to the constitution our “representatives” have consigned the entire nation to a long period of stress and suffering.
But in the end this is a government of the people. By not marching in the streets in the tens of millions we have allowed the bad guys to win. So will we learn from this or just stick our heads in the sand?
- Posted by Jonathan Cole
November 5th, 2008
12:31 am GMT
We will still our heads in the sand, like always!
- Posted by Magic Dragon
November 5th, 2008
2:41 am GMT
[...] Reuters.com [...]
- Posted by RevolutionRadio.org » Blog Archive » Global recession has begun
November 5th, 2008
5:46 am GMT
Inflation is coming - not going
Sure, commodity prices are down from their highs, but it can take up to two years for a commodity, such as iron ore or petroleum, to work its way through the economy. Its may well fall below its current 2.9%, but not thanks to commodity prices. It’s the dollar.
But at the same time as the dollar is rising, the US is pumping unprecedented volumes of cash into the economy. The problem right now is that that money is frozen up and non-inflationary. Once it unfreezes, inflation is going to roar in and send non-import prices through the roof and lead to a falling dollar. It won’t be an accident - this is exactly what the treasury is hoping for so that housing prices will rise and banks will look healthy again.
But for those of you with cash savings, say goodbye to a big chunk of them as they get inflated away.
- Posted by Peter
November 5th, 2008
8:34 am GMT
[...] may not be as accurate as they may first appear. We haven’t seen the economy in such a downturn in nearly 30 years, so effectively this is the first time Internet industries have faced this situation (ignoring the [...]
- Posted by Brandnoo. A Blog by Ben Hindmarch » Blog Archive » Is a recession good for digital media?
November 5th, 2008
1:06 pm GMT
The legacy of the Bush Administration will be a doubling of the National debt, and a long period of malaise followed by the demise of the dollar in 2017 when the SS becomes an expense instead of a way to make the deficit not appear as huge as it really is. The current projection of a ^1 10/12 deficit for FY 09 will prove to be wrong as tax revenues will fall during the recession. This is shaping up to be the Big One and that’s what we’re going to get–The Big One! Thanks Mr. Bush
I hope the big oil executive position you’re going to get was worth it!
- Posted by Lowell |
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User ID: 543539
11/5/2008 10:39 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Invisible Hand and
the Pox Known as Usury
by Rob Kirby | October 3, 2008
Print
First, from Wikipedia, a little background on usury:
Usury (pronounced /ˈjuːʒəri/, comes from the Medieval Latin usuria, "interest" or "excessive interest", from the Latin usura "interest") originally meant the charging of interest on loans. After countries legislated to limit the rate of interest on loans, usury came to mean the interest above the lawful rate. In common usage today, the word means the charging of unreasonable or relatively high rates of interest…..
….But one must always consider that usury, in historical context, has always been inextricably linked to economic abuses, mostly of the masses and of the poor; but sometimes of the financier and royalty, as bankrupt royalty has led to many a demise, thus frowning upon lending at interest or for a euphemistic "just profit". The main moral argument is that usury creates excessive profit and gain without "labor" which is deemed "work" in the Biblical context. Profits from usury do not arise from any substantial labor or work but from mere avarice, greed, trickery and manipulation. In addition, usury creates a divide between people due to obsession for monetary gain. Most importantly, usury commodifies biological time for profit, which is linked to life, considered sacred, God-given and divine, leading to excessive worrying about money instead of God, thus subjugating a God-given sanctity of life to man-made artificial notions of material wealth…..
I began this paper with a broad definition of usury to explicitly point out, in an historical context; it has always been inextricably linked to ECONOMIC ABUSE.
Today is no different.
Interest Rates and Gold Joined at the Hip
Before delving into the nuts-and-bolts of how usury has been utilized in deceitful and harmful ways to perpetrate economic abuses upon mankind we should also grasp the historic relationship between GOLD and INTEREST RATES:
Historically, the gold price is a leading indicator as it tends to predict interest rates. When the gold price is high, interest rates tend to rise in the near future.
1
Gold as a leading indicator to interest rates is more obvious when gold price changes are plotted. Except for the last major upswing in interest rates in 1999, the gold price trend led interest rate levels by about a year.
Also, it’s important to remember that from an historical standpoint, money creation [absent productivity increases] IS inflationary. Inflation historically drives interest rates higher. The question then becomes, what happened to break-down the gold price, yet, send interest rates higher around the 1995 time period [above]?
Economic Laws state that this cannot have happened without good reason.
Refresher As to What Happened In 1995?
We need to wind our clocks and calendars all the way back to 1995, in the twilight of the first Clinton Administration. Sir Robert of Rubin was then Treasury Secretary and the U.S. government was facing default on its financial obligations due to a bitter, partisan debate causing delay on raising the debt ceiling. In the words of Robert Rubin himself in his book, In An Uncertain World, on page 170 he states,
“Without an increase, the federal government would hit the debt ceiling before the end of 1995, possibly as early as October. Default and the President being forced to sign an unacceptable budget were both untenable. We needed to find a way out, rather than simply hoping that at the last minute the opposition would blink and increase the debt limit.”
The ultimate response to this dilemma is chronicled by Rubin, on page 172, where he reveals,
“It was Ed Knight, our savvy chief Treasury counsel, who suggested borrowing from the federal trust funds on an unprecedented scale to postpone default.”
You see folks; as Mr. Rubin was well aware, the federal trust funds DO NOT AND NEVER DID CONTAIN ANY MONEY. These accounts exist in the minds of accountants and lawyers [ledgerdom] only. So here’s what was going on:
Beginning Nov. 12, 1995, the Treasury started issuing government bonds, IOU’s, and putting them in the Social Security Trust Fund “cookie jar” – with the Fed then PRINTING the corresponding amount of money they needed and called this a ‘legitimate loan’. By accounting for their finances in this manner, the government got to understate their annual budget deficits by the same amount that they were burdening the cookie jar with IOU’s – all the while dramatically increasing the unfunded [off balance sheet] liabilities of the government by the same amount. Where I come from, this is neither savvy nor a loan. It is better described as treasonous, fraudulent and larcenous.
At the same time, the methodology for measuring inflation was undergoing rigorous fraudulent changes – which made a mockery of ‘then’ Fed Chairman, Alan Greenspan’s claims of a productivity miracle and, through the yeoman’s work of John Williams [www.Shadowstats.com] was exposed for what they really were: deceitful obfuscations to mask profligate monetary policy being pursued by government. This deception was reinforced by the jaw-boning-ruse we know as the Clinton/Rubin/Summers “strong dollar policy”.
Market rates of interest are historically set at the real rate of inflation plus 250 basis points. The real rate is determined by backing out “inflation” from nominal rates of interest. By understating inflation, interest rates look higher [or more positive] than they otherwise would be.
The budding fraud depicted in the graph above shows that interest rates were behaving as they should but the gold price reacted counter-intuitively?
Why the Gold Price Dropped
In late 1995, Rubin knew that the course being charted, Government profligacy, would naturally lead to a much higher gold price and higher rates; so, the Fed / Treasury [Plunge Protection Team] unleashed their “stealth” gold price suppression scheme, a direct hit from a golden-torpedo, in Jan. 1996:
2
In the chart above, mathematician Mike Bolser employs ‘statistical regression analysis’ to depict what amounts to forensic statistical accounts of how an ‘invisible participant’ involved in the trade whose actions dictate they are not motivated by “profit maximization”.
“Preemptive selling, which is a fraud detection algorithm, measures very aggressive COMEX gold market selling when compared to the London gold market (LBMA). Table 1 displays the percentage of days per month in which the COMEX gold price falls 300% more than the London gold price. The probability of changing macroeconomics being the cause for such extreme New York price drops is highly diminished because the two markets trade the same commodity on the same day. Preemptive selling should not be confused with price volatility or rate of change, which are measures of rapid price fluctuation. In addition, preemptive selling is a measure of relative activity between two markets. Recall also that it does not measure the volume of comparative selling, only its effect as measured by gold market prices.”
With the gold price effectively “dead and buried”, there was still a problem that needed to be tended to – to prevent or stem the “Bond Vigilantes” from selling bonds in sufficient quantities to “FORCE” interest rates higher.
The solution to this part of the problem [rising rates] is where J.P. Morgan’s [now] 93 Trillion Derivatives Book swung into action.
Embedded in every interest rate swap is a bond trade. In simple terms, the greater the volume of interest rate swaps – the greater is demand for bonds to hedge them. Ergo, if enough interest rate swaps are transacted – they serve as a “VACUUM CLEANER”, sucking up ALL MEDIUM TERM BONDS [3 – 10 yrs.] in their path.
In this respect, bond trading volume originating from the interest rate swap derivatives complex overwhelmed and supplanted traditional bond market participants. The motivations and risk tolerances between these two classes of “traders” are not necessarily consistent with one another – and in the extreme - manipulatively opposite to one another. We have been witness to the same type of phenomena in the precious metals arena where futures [COMEX and LBMA] prices have served to “trump” or suppress those which would be dictated by physical supply or demand. This is now manifesting itself in bifurcation of our capital markets – banks are now refusing to lend money at Libor [an interest rate futures derived price] because it is not reflective of their costs of funds and owners of physical metal are refusing to part with their precious at COMEX prices, because it costs more in many cases to mine it. This is evidenced by stiff and increasing premiums being paid for physical metal.
What’s more, interest rate swaps being “off-balance-sheet items” – an untrained eye [or Bond Vigilante, perhaps?] was none-the-wiser as to why yields were counter-intuitively falling or remaining at low levels despite demonstrable inflationary pressures. According to the Office of the Comptroller of the Currency’s [archived] Quarterly Derivatives Fact Sheets:
“J.P. Morgan’s Interest rate swap book grew from 12.716 Trillion Notional at Q4/1995 to 14.7 Trillion at Q2/1996.”
Back in those days a couple of Trillion used to buy a lot of love, or respect.
Against this backdrop, bond vigilantes quickly joined the ranks of the “extinct” – acquiescing or losing their jobs - while interest rates, the primary efficient arbiter of capital – became fallacious and meaningless.
It was this GROSS mis-pricing of Capital and associated market rigging practices that facilitated ALL THE ASSET BUBBLES - from the contorted Dot Com Boom to the Real Estate debacles that followed.
To mask and obfuscate their ever heightening profligacy [if you consider 850 billion dollar bail-outs for Wall Street profligate], officialdom has increasingly relied on the handiwork of their agents in the derivatives markets of strategic commodities to suppress or cap prices – trying to turn back accelerating runs-on-banks. In this surreal set of circumstances, while fiat currency continues to self destruct before our very eyes, the saying that, “price action makes market commentary” leaves the mainstream financial press and unwitting market commentators babbling about rampant deflation even as these “bank-runs” and counter-intuitive physical shortages intensify.
Not by coincidence, if one reads an Introductory Economics Text Book, one would read that artificially low, negative real interest rates deter savings and encourage consumption and frivolous speculation while creating shortages of basic goods.
Does any of this sound familiar?
Welcome home, folks.
[link to www.financialsense.com] |
| Anonymous Coward
User ID: 543539
11/5/2008 9:28 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
United States Entering its Darkest Period In History
Politics / US Economy Nov 04, 2008 - 11:43 AM
By: Dr_Janice_Dorn
Politics
As predicted in The Big Rollover Thesis that we first presented in 2005, we are on the cusp of entering the darkest period in history that most of us have ever experienced. The people that really know about this are the Silent Generation. They feel it intensely because they were either born into it or grew up in it. They want to speak about it, but are either silenced or in fear. At a time when we need their guidance, ageism is upon us, and no one wants to listen to them.
At no other time does the phrase “Is That All There Is?” apply. These people were born into a depression and now they face dying during a depression. They have come full circle. So will each of us.
At the time of this writing (November 2, 2008 at 9:15 PM EST) it is clear to me that life in the United States will never be the same. Even though we knew this in 2005 and followed every instruction of The Big Rollover, we are worried. Have we done enough to protect our families and our hard-earned life savings? The brutal bear market has ravaged the world and the majority of people will never again be made “whole.” In other words, it will come back, but it will never come back to where it started. Never. Many have seen their entire life savings wiped out on the back of the unmitigated greed of the banker gangsters and their cronies in Washington. Kakistocracy knows no bounds to its power, greed or stupidity.
In retrospect, we will come to see that they have sown the seeds of their own destruction, but not before the death of America. We don't need terrorists from outside to destroy us. We will do it ourselves.
In terms of the stock market, there will likely be a respite and the last chance to get out. Beginning this week, we are changing www.thetradingdoctor.com completely because our members need and deserve real time commentary on the markets and actionable trades to keep them out of harms way. They need to how and when to get in, when to stay out way and how to turn off the continuous parroting from the lame stream media. The truth is not there. It is infotainment with flashing lights and scripted dialog. It is not real, rather more akin to Barnum and Bailey's Greatest Show On Earth.
We now prepare for the media circus surrounding what will go down in history as the most deceptive, lying, opaque and foolish Presidential campaign in history. If this is not a sham and a scam, I don't know what is.
Prepare for anything to happen. Before this is over, there is going to be a revolution in the United States. History has ordained it. It will not be pretty, but those who follow the directives of The Big Rollover will survive and prosper. The rest of The Ostrich Nation will keep their heads in the sand as whatever is left of their freedom, entrepreneurial spirit and privacy is taken away from them. The revolution is coming. This time, it will be sterilized before it is televised. It is coming and those who are aware and evolved have real reason for concern. It is time for each of us to take complete and total responsibility for our thoughts, deeds and feelings. It is time for like-minded free market thinkers to ban together and stay together. If not now, I certainly don't know when.
I send healing energies to everyone in the world suffering today.
Until Next Time,
Good Trading and Brain On!
By Dr. Janice Dorn, MD, PhD
Prescriptions for Profits
www.thetradingdoctor.com |
| .
User ID: 546136
11/8/2008 11:28 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
J.P. Morgan Loving Their Market Manipulation Handiwork
Stock-Markets / Market Manipulation Nov 07, 2008 - 04:01 AM
By: Rob_Kirby
Stock-Markets
Best Financial Markets Analysis ArticleThe following research paper was compiled as the basis for a radio interview with Patrick Timpone at One Radio Network .
Morgan is the quintessential leviathan in the Interest Rate arena through their obscenely sized Medium-Term Interest Rate Swap book which stood at 59 Trillion at June 30, 2008 .
The interest rate swap book, due to its sheer size, overwhelms the bond complex by creating artificial demand for government securities. This interest rate suppressive activity began in earnest back in the 1990's and has kept market rates of interest at artificially low levels. The FUNDAMENTAL [and ongoing] MISPRICING of CAPITAL – for many years – has led to a myriad of economic excesses like the Dot Com boom, subsequent housing boom and the financial asset boom itself.
Morgan's overbearing effect in the interest rate complex required the simultaneous suppression of the gold price. This was done to make falsified inflation data seem credible. It has often been said that, “if real inflation heats up – BOND VIGILANTES would raise market rates of interest reflective of real inflation”. The reality folks, the BOND VIGILANTES are extinct – they lost their jobs long ago – being swallowed by the black hole that is J.P. Morgan's derivatives book. This is documented in a laundry list of articles archived at Kirbyanalytics.com
In the energy area [crude] – J.P. Morgan was “granted” the rights to, effectively, set up the Central Bank of Iraq in Dec. 2003:
J.P. Morgan Chase was chosen by the Coalition Provisional Authority [CPA] to “set up” the NEW Central Bank of Iraq [specifically, the Trade Bank of Iraq ]. Take note how this TRADE BANK only became operational in December of 2003:
• Trade Finance. The Trade Bank of Iraq (TBI) was established in July 2003 to facilitate trade of goods and services to and from Iraq by providing irrevocable letters of credit. The TBI officially became fully operational in December 2003 and has a services contract with a multi-international banking consortium led by JP Morgan Chase. Since opening in December , the Trade Bank of Iraq has issued or has pending 183 letters of credit, totaling $708.9 million in imports from thirty-one countries. Letters of credit have been issued on behalf of Iraqi Ministries as well as several state-owned enterprises.
In that capacity , Morgan was charged with developing the framework of collateralizing movable and immovable property for the nation of Iraq
When we take a look at “The Administrator's Weekly Report” – Feb. 28 – March 5, 2004 where it's all neatly explained for us:
V. LAY FOUNDATIONS FOR AN OPEN ECONOMY
Provide IG Staff Capability; Trade Bank ; WTO Observer Status; Draft Intellectual Property law to IGC by April 15, 2004; Develop Framework for Collateralizing Movable and Immovable Property
Here's What They Did:
I'd now like to draw your attention to a research paper published just last week by the good folks over at the Commodity Futures Trading Commission [CFTC]:
CFTC's Office of the Chief Economist Releases Study on “Market Growth, Trader Participation and Pricing in Energy Futures Markets”
Washington , D.C. — The Commodity Futures Trading Commission's (CFTC) Office of the Chief Economist today released a study titled “ Market Growth, Trader Participation and Pricing in Energy Futures Markets .” This study provides an analysis of the composition of traders across different energy futures contract maturities and addresses questions relating to price discovery in these markets. Specifically,
• The authors use CFTC data on futures trader positions to document major changes in the size and term structure of the U.S. crude oil (WTI) futures market. The authors find that as recently as 2000, trading activity in this market was heavily concentrated in nearby contracts. Since then, overall open interest has grown two-fold, with trader activity at the back end of the term structure increasing more than twice as much as the market as a whole.
• The market growth in long-term (more than three years) positions generally started in 2004, which coincides with the growth in participation by commodity swap dealers.
We know Morgan was a major player because they admit it and brag about it:
To get your head around how ole J.P. Morgan trades energy futures, we need look no further than their own web site , [ article has since been removed from J.P. Morgan's site ] where they're more than happy to tell us,
Risk magazine, January 2006
J.P. Morgan was named Risk magazine's Energy derivatives house of the year in their January issue. According to Risk , "J.P. Morgan has emerged as a key player in energy derivatives over the past year." Since 2004, under the guidance of Beau Taylor, global co-head of Energy, the firm has built a leading energy trading practice. Focus has extended from natural gas and crude exotic derivatives to include electricity, coal and emissions trading. [RK bold emphasis]
They wear it like a badge of honor, don't they? To “borrow” a cliché [pun intended] - these guys really are good, aren't they?
The selling of “long dated” oil futures [ by guess who? ] began in earnest in 2004. We know this because the CFTC has told us. Long dated futures [similar to long dated bonds or Medium-Term Interest Rate Swaps] is where EXPECTATIONS are formed about the future price of commodities.
And we all know how important expectations are, where inflation is concerned, to folks like Chopper Ben Bernanke.
We all read and hear from officialdom that the prospects for inflation, while elevated somewhat recently, always remain anchored and/or subdued on a forward looking basis:
….if the public experiences a spell of inflation higher than their long-run expectation, but their long-run expectation of inflation changes little as a result, then inflation expectations are well anchored. If, on the other hand, the public reacts to a short period of higher-than-expected inflation by marking up their long-run expectation considerably, then expectations are poorly anchored. ~ FED Chairman, Ben Bernanke, July 10, 2007
In this speech titled, Inflation Expectations and Inflation Forecasting , Mr. Bernanke goes on at length about the influence that ‘expectations' have on inflation but he fails [intentionally, perhaps?] to mention its true cause :
“Inflation is a phenomenon caused by the increase of money supply relative to the growth of production capacity for goods and services.”
Having firmly established themselves in the crude oil marketplace, in Dec. 2005 J.P. Morgan moved on to the Natural Gas Arena:
By Rob Kirby
[link to www.kirbyanalytics.com]
Rob Kirby is the editor of the Kirby Analytics Bi-weekly Online Newsletter, which provides proprietry Macroeconomic Research. Subscribers to Kirbyanalytics.com are benefiting from paid in-depth research reports, analysis and commentary on rapidly unfolding economic developments as well as recommendations on courses of action to profit from chaos. Subscribe here . |
| .
User ID: 546136
11/8/2008 11:30 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Anonymous Coward
User ID: 473581
11/6/2008 11:48 PM
Report abusive post
The strange case of falling international reserves
[link to www.plata.com.mx]
During the past 10 years, at least, I have been following the growth of International Reserves. The first graph I elaborated to show their growth was back in 1999 and it was based on IMF data up to 1997. Recently, I have been updating the graph using Alex Tanzi´s numbers. Alex works at Bloomberg and from time to time, Doug Noland at www.prudentbear.com quotes his numbers regarding International Reserves, excluding gold.
As of August 2008, as you can see from the graph, according to Alex Tanzi International Reserves were growing at the explosive annual rate of 26.5%. Suddenly, since August, Reserves have stopped growing.
Graphic
In August, they were just under $7 trillion expressed in dollars, though “paper” Reserves are made up not only of dollars, but also euros, British pounds, Japanese Yen and a smaller quantity of some other currencies.
It seems to me that when a huge number such as $7 trillion suddenly stops growing, it must indicate that something very serious is going on. The growth of Reserves was so severe it was really an explosion; quite abruptly, it has stalled and has actually turned negative.
One explanation might be that since the figure is given in dollars, and the values of the other currencies which make up Reserves have been falling with regard to the dollar (except for the yen), that the contraction in the value of euro and pound Reserves caused the amount of Reserves to begin contracting.
Still, the huge rate of growth of Reserves, year-on-year, was up to 26.5%, and it seems to me that this previous explanation is not sufficient to account for a sudden halt in growth and the onset of a decrease in Reserves.
I have not seen a single article dealing with this important change; I comb the Internet daily and I have found not one comment on this development.
The International Reserves were growing by leaps and bounds, as a consequence of the “Imbalances in International Trade”, where the countries which were issuing currencies accepted as Reserves were exporting huge amounts of their currencies in “payment” of their trade deficits. These currencies were then re-invested by the exporting countries in bonds and agency debt. The main actor was the US, which was able to fund its enormous fiscal deficits through the sale of these bonds and agency debts. It was a nice deal while it lasted for the US and, I suppose, for the Brits as well as the Europeans.
Now, if the Reserves are no longer growing but diminishing, this might indicate that the exporting countries are no longer buying and accumulating more US, British and European debt. If they are not accumulating more foreign currency bonds and debt, then the fiscal deficits of the US, the Brits and the European Union countries are no longer being funded – especially important to the US, which is running an immense fiscal deficit, what with the US Treasury going into debt like a drunken sailor on account of the need to bail-out all and sundry debtors.
Now if the US deficit is not being funded, then that means that the fiscal deficit is simply being monetized by the Fed. Or what else can it mean?
The US is on track to incur a fiscal deficit of $1 Trillion, perhaps much more, in this fiscal year. If the International Reserves are not growing, that means it will be impossible to fund that deficit. That would mean: monetary inflation in spades, in the US.
I’ll leave you with this question: what is the significance of the drastic change in the growth-trend of International Reserves, from explosive growth, to the sudden beginning of a contraction?
I hope others, more competent than myself, address this question. I believe it is quite important that we have an authoritative answer to it. |
| .
User ID: 546136
11/8/2008 11:35 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The hedge funds continue selling every asset class to raise cash. Over 50 trillion dollars worth! Washington is trying to save the economy in its usual convoluted way. Support the failures and ignore the winners.
Washington is now pumping billions of dollars into institutions that have clearly failed. These collapsing institutions haven't invested in America . If these banking, insurance and brokerage companies were adding so much value to our economy then where are the jobs? Where is the new industry? Where are the new factories? Successful investment is that which brings real growth to an economy. Not just an inflated stock portfolio whose value can disappear over night.
[link to www.marketoracle.co.uk] |
| Anonymous Coward
User ID: 546869
11/9/2008 2:37 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
In fact, existing federal banking laws say that no bank can have more than 10 percent of the domestic deposit market — a threshold recently surpassed by all three superbanks.
When asked whether the government would take any action, a Justice Department official was noncommittal.
“It’s always something we’ve looked at and will continue to look at," said spokeswoman Gina Talamona. "It’s something we’ve looked at as part of our general antitrust review.”
The reason limits on market share were put in place were so banks didn’t get so big they’d become monopolies that could risk the whole economy, explains Atul Gupta, finance department chair for Bentley University in Boston.
[link to www.msnbc.msn.com] |
| Anonymous Coward
User ID: 517645
11/9/2008 2:40 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Well nobody can say we were never warned! |
| FHL(C)
User ID: 546923
11/9/2008 5:29 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
[link to www.321gold.com]
Cash or Gold?
Eric Sprott and Sasha Solunac
Sprott Asset Management
posted Nov 6, 2008
Allow us to preface this article by saying that we'll be making no mention of the 'manipulation' of the price of gold. Let's put that issue aside for now because, in the long run, it just won't matter. We are in the midst of a financial crisis - not just any financial crisis mind you, but arguably the worst and most pervasive the world has seen in almost a century (second only to the Great Depression... thus far). In the sea of financial assets and currencies that are being decimated the world over, the one true safe haven continues to be gold.
During these times, it is understandable that the prevailing investor sentiment is fear. People are fearful of their savings, fearful of their jobs, and especially fearful of risk, having just witnessed how quickly a bear market can decimate portfolios. The other major factor currently affecting markets is deleveraging. As we all know by now, the 2002-2007 credit bubble was all about leverage. Leverage in housing and real estate. Leverage in the banking system. Leveraged hedge funds. As long as all asset classes continued to go up, then leverage was the winning formula. Although such a myopic strategy paid handsomely in the short run, the premise of the preceding sentence is, of course, false over the longer term. Thus, the winning strategy of yesteryear is now a ruinous one, leading to a vicious circle of deleveraging that is gutting the value of almost all assets. In this respect, gold is proving to be no exception. On the flip side of deleveraging is the frenetic buying of what was on the short side of the leveraged trade, namely, US dollars and Japanese yen. As currencies with low interest rates, they were borrowed to effect the leverage and are now benefiting from what is essentially short covering as leverage is unwound. This is another reason that the price of gold, in US dollar terms, is down over the past month - albeit, not nearly as much as other assets that were on the long side of the leveraged trade.
That said, we must confess to being perplexed (although far from discouraged) by the recent price action of gold. It is not behaving the way one would expect it to behave during times of financial crisis; namely, as the consummate safe haven asset of choice when all other assets are being shunned. Mind you, gold isn't performing badly by any means. In Canadian and Australian dollar terms the price of gold is at or near all-time highs. Such is the case in most of the world's currencies. Even in Euro terms, the price of gold is within 5% of the high it reached earlier this year. But gold has yet to catch a wind under its sails in all currencies. Is it really the 'barbarous relic', rendered obsolete by the stability and prosperity of the paper-based fiatcurrency global financial system? Laughably, this argument was once used by anti-gold proponents as the main reason not to own gold. How quickly things have changed! Today's financial system, with the institution of the central bank at its foundation, has proven to be anything but as stable and prosperous as once thought. For the first time in a long while, the very foundations of capitalism are being put into question. Once infallible central banks of developed nations have become almost irrelevant. The financial markets, even the stock markets, are completely ignoring them. Central banks have shown, to their chagrin, that they can only solve one problem by causing another. The system is in such a state of disarray that the leaders of many of the world's developed countries, including the US, Britain, France and others, are now proposing some sort of massive overhaul in the way the world does finance. How it will all play out remains to be seen. Certainly it will involve greater government involvement and therefore greater waste and inefficiency. But be that as it may, we would not consider any paper-based asset as 'safe' right now. Especially not currencies, as we will explain shortly. When the markets realize this, the outcome should be highly bullish for gold.
One of the key features of gold, and by gold we mean physical gold (not ETFs, not futures), is that it is one of the very few assets that has no one else's liability attached to it. We believe this point is particularly relevant today. At its heart, this financial crisis is all about the systematic lack of trust in the liabilities of others. Everybody is worried about default/counterparty risk. One example, yet to fully play itself out, is derivatives. The fallout in this area could be disastrous, as we've written about several times in the past, adding fuel to the fire of the global financial rout. But the problem, clearly, is by no means only relegated to derivatives. It's the problem with all financial assets, even the traditionally safest ones. Banks don't want to lend to each other because they don't want an asset that is another bank's liability. The money markets seized up because nobody wanted to own another business's liability, even over the very short term. Even bank deposits, traditionally one of the 'safest' assets around, is some bank's liability and therefore a newfound cause for concern. Like it or not, in the financial world everything is someone else's liability and every financial asset has default risk. Even cash under the mattress is someone else's liability... it's the liability of the central bank. Which is why nobody should be breathing a sigh of relief that central banks are now guaranteeing everything. They guaranteed all bank deposits. They guaranteed money market funds. They guaranteed interbank lending. But at what cost? As they are wont to do, they only traded one problem for another. For what does a government guarantee really mean? It means they are the buyer of last resort for other people's liabilities. It means they are ready, willing, and able to print money in any quantity to back the guarantee. It means they are trying to solve the problem of default risk by causing the equally nefarious problem of purchasing power/inflation risk. (Conversely they could tax their citizenry into oblivion, but this would be much less politically acceptable than printing money, especially in a debtor nation such as the US.) During times of financial crisis, it is best not to trust anybody, especially not the central banks. When even the safest counterparties can no longer be trusted, gold should be the asset of choice. It is the only asset that has absolutely no default risk whatsoever and, in our opinion, it is the only true safe haven asset.
For now (though we believe it a temporary state of affairs) the markets seem to believe that cash is king. They are still content to own paper in times of trouble, particularly US dollars and US Treasuries. But such confidence is misplaced, for many reasons. In the current environment, deflation à la the Great Depression is highly unlikely. Ben Bernanke, the head of the Federal Reserve, is already on record as saying deflation cannot happen, using the helicopter drop analogy to prove his point. Under a fiat currency system this is true enough, and made abundantly clear with the central banks assuming the role of buyer and guarantor of last resort. But regardless of what the central bank does, we believe the fundamentals have never looked worse for the US dollar. On top of the money to be spent bailing out the financial system (at least $1 trillion... likely $2 trillion and more), there is also the recession to deal with. Even during the best of times the US government ran sizable deficits, in the worst of times these deficits will go through the roof. Going forward they could easily exceed $1 trillion per year. Then there are the social security and medicare payments the US government has promised to baby boomers, that will begin to escalate exponentially as they begin to retire starting this year. The present value of these obligations, according to the 2007 Financial Report of the United States Government, is $41 trillion using a 75-year horizon and $90 trillion using an infinite horizon. [ 1 ] We stress that this is present value, which is like compounding backwards. It is the amount of money that needs to be set aside today in order to meet the obligation in the future. It's not a long run problem anymore. It's here and now.
For the above reasons, we believe the current flight to US dollars is a knee jerk reaction that won't have staying power. When asset prices fall, people take comfort in the fact that one US dollar will always be worth one US dollar. But this stability is only illusory. The real question should be, what will one US dollar be able to buy in the future? Is a sub-4% yield sufficient to preserve wealth over the next 10 years? Much less, is a 2.7% yield likely to preserve wealth over the next five? We find it highly unlikely, especially in this environment where the Federal Reserve is throwing everything it's got at the crisis. We believe the next leg of the crisis will see people becoming fearful of cash and bonds. Although, to date, the US dollar has fared relatively well versus other currencies, in the long run we believe it'll fare relatively poorly versus gold.
In other countries, people would have done well, as this crisis was unfolding, to be fearful of cash. In Iceland for example, where the krona has been devalued by 80%, people are probably wishing they had owned gold. All over the world, countries are experiencing violent currency movements. The Brazilian real and the Mexican peso have lost a third of their value in the past three months. Even in relatively developed countries, like South Korea, the won has lost a third of its value. There is a currency crisis unfolding in Eastern Europe right now, with many currencies down 20% versus the Euro in a single month. This is causing considerable hardship in countries like Hungary, where people took out loans and mortgages in foreign currencies in order to avoid high interest rates. [ 2 ] The cost of repaying those loans is now significantly higher than what they anticipated. There are huge swaths of the world where cash has proven to be anything but safe. They are all wishing they bought gold. We believe that holders of US dollars will soon be wishing the same thing.
With gold coins in a physical shortage and selling at a premium to spot, there is evidence that investors are starting to flock towards gold. It won't take much buying to catalyze the price of gold. At today's price, the total amount of gold ever produced is worth only $3.5 trillion, a mere drop in the bucket compared to the world's financial assets which, financial crisis notwithstanding, still total somewhere in the neighbourhood of $100-$150 trillion. If some of these paper assets were to be redistributed to gold - nothing would be more prudent - then the recent drop in the price of gold presents a tremendous buying opportunity for the astute investor.
###
__________
1 "Fiscal Year 2007 Financial Report of the United States Government", US Government Accountability Office, www.goa.gov, p. 131-132
2 "Lean Times, Tough Steps in Hungary", Wall Street Journal, October 23, 2008
Eric Sprott and Sasha Solunac
Markets at a Glance
October 2008
[link to freewordofgod.yuku.com] |
| Anonymous Coward
User ID: 548505
11/12/2008 10:24 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Anonymous Coward
User ID: 549280
11/12/2008 8:21 AM
Re: Morgan Stanley: "Credit Crisis Has Moved Into Dangerous Panic Phase" Quote
Financial Meltdown: The Greatest Transfer of Wealth in History
How to Reverse the Tide and Democratize the US Monetary System
by Ellen Brown
Global Research, October 17, 2008
author's website: webofdebt.com
"Admit it, mes amis, the rugged individualism and cutthroat capitalism that made America the land of unlimited opportunity has been shrink-wrapped by half a dozen short sellers in Greenwich, Conn., and FedExed to Washington, D.C., to be spoon-fed back to life by Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson. We’re now no different from any of those Western European semi-socialist welfare states that we love to deride."– Bill Saporito, "How We Became the United States of France," Time (September 21, 2008)
On October 15, the Presidential candidates had their last debate before the election. They talked of the baleful state of the economy and the stock market; but omitted from the discussion was what actually caused the credit freeze, and whether the banks should be nationalized as Treasury Secretary Hank Paulson is now proceeding to do. The omission was probably excusable, since the financial landscape has been changing so fast that it is hard to keep up. A year ago, the Dow Jones Industrial Average broke through 14,000 to make a new all-time high. Anyone predicting then that a year later the Dow would drop nearly by half and the Treasury would move to nationalize the banks would have been regarded with amused disbelief. But that is where we are today.1
Congress hastily voted to approve Treasury Secretary Hank Paulson’s $700 billion bank bailout plan on October 3, 2008, after a tumultuous week in which the Dow fell dangerously near the critical 10,000 level. The market, however, was not assuaged. The Dow proceeded to break through not only 10,000 but then 9,000 and 8,000, closing at 8,451 on Friday, October 10. The week was called the worst in U.S. stock market history.
On Monday, October 13, the market staged a comeback the likes of which had not been seen since 1933, rising a full 11% in one day. This happened after the government announced a plan to buy equity interests in key banks, partially nationalizing them; and the Federal Reserve led a push to flood the global financial system with dollars.
The reversal was dramatic but short-lived. On October 15, the day of the Presidential debate, the Dow dropped 733 points, crash landing at 8,578. The reversal is looking more like a massive pump and dump scheme – artificially inflating the market so insiders can get out – than a true economic rescue. The real problem is not in the much-discussed subprime market but is in the credit market, which has dried up. The banking scheme itself has failed. As was learned by painful experience during the Great Depression, the economy cannot be rescued by simply propping up failed banks. The banking system itself needs to be overhauled.
A Litany of Failed Rescue Plans
Credit has dried up because many banks cannot meet the 8% capital requirement that limits their ability to lend. A bank’s capital – the money it gets from the sale of stock or from profits – can be fanned into more than 10 times its value in loans; but this leverage also works the other way. While $80 in capital can produce $1,000 in loans, an $80 loss from default wipes out $80 in capital, reducing the sum that can be lent by $1,000. Since the banks have been experiencing widespread loan defaults, their capital base has shrunk proportionately.
The bank bailout plan announced on October 3 involved using taxpayer money to buy up mortgage-related securities from troubled banks. This was supposed to reduce the need for new capital by reducing the amount of risky assets on the banks’ books. But the banks’ risky assets include derivatives – speculative bets on market changes – and derivative exposure for U.S. banks is now estimated at a breathtaking $180 trillion.2 The sum represents an impossible-to-fill black hole that is three times the gross domestic product of all the countries in the world combined. As one critic said of Paulson’s roundabout bailout plan, "this seems designed to help Hank’s friends offload trash, more than to clear a market blockage."3
By Thursday, October 9, Paulson himself evidently had doubts about his ability to sell the plan. He wasn’t abandoning his old cronies, but he soft-pedaled that plan in favor of another option buried in the voluminous rescue package – using a portion of the $700 billion to buy stock in the banks directly. Plan B represented a controversial move toward nationalization, but it was an improvement over Plan A, which would have reduced capital requirements only by the value of the bad debts shifted onto the government’s books. In Plan B, the money would be spent on bank stock, increasing the banks’ capital base, which could then be leveraged into ten times that sum in loans. The plan was an improvement but the market was evidently not convinced, since the Dow proceeded to drop another thousand points from Thursday’s opening to Friday’s close.
One problem with Plan B was that it did not really mean nationalization (public ownership and control of the participating banks). Rather, it came closer to what has been called "crony capitalism" or "corporate welfare." The bank stock being bought would be non-voting preferred stock, meaning the government would have no say in how the bank was run. The Treasury would just be feeding the bank money to do with as it would. Management could continue to collect enormous salaries while investing in wildly speculative ventures with the taxpayers’ money. The banks could not be forced to use the money to make much-needed loans but could just use it to clean up their derivative-infested balance sheets. In the end, the banks were still liable to go bankrupt, wiping out the taxpayers’ investment altogether. Even if $700 billion were fanned into $7 trillion, the sum would not come close to removing the $180 trillion in derivative liabilities from the banks’ books. Shifting those liabilities onto the public purse would just empty the purse without filling the derivative black hole.
Plan C, the plan du jour, does impose some limits on management compensation. But the more significant feature of this week’s plan is the Fed’s new "Commercial Paper Funding Facility," which is slated to be operational on October 27, 2008. The facility would open the Fed’s lending window for short-term commercial paper, the money corporations need to fund their day-to-day business operations. On October 14, the Federal Reserve Bank of New York justified this extraordinary expansion of its lending powers by stating:
"The CPFF is authorized under Section 13(3) of the Federal Reserve Act, which permits the Board, in unusual and exigent circumstances, to authorize Reserve Banks to extend credit to individuals, partnerships, and corporations that are unable to obtain adequate credit accommodations. . . .
"The U.S. Treasury believes this facility is necessary to prevent substantial disruptions to the financial markets and the economy and will make a special deposit at the New York Fed in support of this facility."4
That means the government and the Fed are now committing even more public money and taking on even more public risk. The taxpayers are already tapped out, so the Treasury’s "special deposit" will no doubt come from U.S. bonds, meaning more debt on which the taxpayers have to pay interest. The federal debt could wind up running so high that the government loses its own triple-A rating. The U.S. could be reduced to Third World status, with "austerity measures" being imposed as a condition for further loans, and hyperinflation running the dollar into oblivion. Rather than solving the problem, these "rescue" plans seem destined to make it worse.
The Collapse of a 300 Year Ponzi Scheme
All the king’s men cannot put the private banking system together again, for the simple reason that it is a Ponzi scheme that has reached its mathematical limits. A Ponzi scheme is a form of pyramid scheme in which new investors must continually be sucked in at the bottom to support the investors at the top. In this case, new borrowers must continually be sucked in to support the creditors at the top. The Wall Street Ponzi scheme is built on "fractional reserve" lending, which allows banks to create "credit" (or "debt") with accounting entries. Banks are now allowed to lend from 10 to 30 times their "reserves," essentially counterfeiting the money they lend. Over 97 percent of the U.S. money supply (M3) has been created by banks in this way.5 The problem is that banks create only the principal and not the interest necessary to pay back their loans. Since bank lending is essentially the only source of new money in the system, someone somewhere must continually be taking out new loans just to create enough "money" (or "credit") to service the old loans composing the money supply. This spiraling interest problem and the need to find new debtors has gone on for over 300 years -- ever since the founding of the Bank of England in 1694 – until the whole world has now become mired in debt to the bankers’ private money monopoly. As British financial analyst Chris Cook observes:
"Exponential economic growth required by the mathematics of compound interest on a money supply based on money as debt must always run up eventually against the finite nature of Earth’s resources."6
The parasite has finally run out of its food source. But the crisis is not in the economy itself, which is fundamentally sound – or would be with a proper credit system to oil the wheels of production. The crisis is in the banking system, which can no longer cover up the shell game it has played for three centuries with other people’s money. Fortunately, we don’t need the credit of private banks. A sovereign government can create its own.
The New Deal Revisited
Today’s credit crisis is very similar to that facing Franklin Roosevelt in the 1930s. In 1932, President Hoover set up the Reconstruction Finance Corporation (RFC) as a federally-owned bank that would bail out commercial banks by extending loans to them, much as the privately-owned Federal Reserve is doing today. But like today, Hoover’s plan failed. The banks did not need more loans; they were already drowning in debt. They needed customers with money to spend and to invest. President Roosevelt used Hoover’s new government-owned lending facility to extend loans where they were needed most – for housing, agriculture and industry. Many new federal agencies were set up and funded by the RFC, including the HOLC (Home Owners Loan Corporation) and Fannie Mae (the Federal National Mortgage Association, which was then a government-owned agency). In the 1940s, the RFC went into overdrive funding the infrastructure necessary for the U.S. to participate in World War II, setting the country up with the infrastructure it needed to become the world’s industrial leader after the war.
The RFC was a government-owned bank that sidestepped the privately-owned Federal Reserve; but unlike the private banks with which it was competing, the RFC had to have the money in hand before lending it. The RFC was funded by issuing government bonds (I.O.U.s or debt) and relending the proceeds. The result was to put the taxpayers further into debt. This problem could be avoided, however, by updating the RFC model. A system of public banks might be set up that had the power to create credit themselves, just as private banks do now. A public bank operating on the private bank model could fan $700 billion in capital reserves into $7 trillion in public credit that was derivative-free, liability-free, and readily available to fund all those things we think we don’t have the money for now, including the loans necessary to meet payrolls, fund mortgages, and underwrite public infrastructure.
Credit as a Public Utility
"Credit" can and should be a national utility, a public service provided by the government to the people it serves. Many people are opposed to getting the government involved in the banking system, but the fact is that the government is already involved. A modern-day RFC would actually mean less government involvement and a more efficient use of the already-earmarked $700 billion than policymakers are talking about now. The government would not need to interfere with the private banking system, which could carry on as before. The Treasury would not need to bail out the banks, which could be left to those same free market forces that have served them so well up to now. If banks went bankrupt, they could be put into FDIC receivership and nationalized. The government would then own a string of banks, which could be used to service the depository and credit needs of the community. There would be no need to change the personnel or procedures of these newly-nationalized banks. They could engage in "fractional reserve" lending just as they do now. The only difference would be that the interest on loans would return to the government, helping to defray the tax burden on the populace; and the banks would start out with a clean set of books, so their $700 billion in startup capital could be fanned into $7 trillion in new loans. This was the sort of banking scheme used in Benjamin Franklin’s colony of Pennsylvania, where it worked brilliantly well. The spiraling-interest problem was avoided by printing some extra money and spending it into the economy for public purposes. During the decades the provincial bank operated, the Pennsylvania colonists paid no taxes, there was no government debt, and inflation did not result.7
Like the Pennsylvania bank, a modern-day federal banking system would not actually need "reserves" at all. It is the sovereign right of a government to issue the currency of the realm. What backs our money today is simply "the full faith and credit of the United States," something the United States should be able to issue directly without having to draw on "reserves" of its own credit. But if Congress is not prepared to go that far, a more efficient use of the earmarked $700 billion than bailing out failing banks would be to designate the funds as the "reserves" for a newly-reconstituted RFC.
Rather than creating a separate public banking corporation called the RFC, the nation’s financial apparatus could be streamlined by simply nationalizing the privately-owned Federal Reserve; but again, Congress may not be prepared to go that far. Since there is already successful precedent for establishing an RFC in times like these, that model could serve as a non-controversial starting point for a new public credit facility. The G-7 nations’ financial planners, who met in Washington D.C. this past weekend, appear intent on supporting the banking system with enough government-debt-backed "liquidity" to produce what Jim Rogers calls "an inflationary holocaust." As the U.S. private banking system self-destructs, we need to ensure that a public credit system is in place and ready to serve the people’s needs in its stead.
Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include the bestselling Nature’s Pharmacy, co-authored with Dr. Lynne Walker, and Forbidden Medicine. Her websites are www.webofdebt.com and www.ellenbrown.com.
Ellen Brown is a frequent contributor to Global Research. Global Research Articles by Ellen Brown
[link to www.globalresearch.ca] |
| Anonymous Coward
User ID: 548505
11/12/2008 10:37 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Secret Plan For IMF
World Dictatorship
G-20 Summit In DC On 11-15-8
By Webster Tarpley
11-10-8
This is a confidential strategy paper for the November 15 G-20 summit in Washington DC. This is not a new Bretton Woods in any sense, but rather a British-steered attempt to impose the dictatorship of the International Monetary Fund (IMF) on the entire planet, wiping out all hope of economic recovery, the modernization of the developing countries, and national sovereignty at the same time.
Under this plan, the IMF would dictate the economic policies of all states. The IMF orthodoxy is austerity, sacrifice, deregulation, privatization, union busting, wage reductions, free trade, the race to the bottom, and prohibitions on advanced technologies. These policies would strangle humanity.
The Brazil-Russia-India-China bloc is reportedly objecting to putting so much power into the hands of the IMF, which is dominated by the US and the British, with Prime Minister Gordon Brown and Treasury Secretary Paulson of Goldman Sachs laying down the party line.
The new Chinese economic measures are the opposite of the bankers' bailouts imposed so far in the wealthier countries. The Chinese will spend $585 billion on infrastructure, transportation, housing, and food production, with special attention to railroads, airports, and roads. The Chinese package is in the spirit of the Franklin D. Roosevelt New Deal, and it will maintain forward progress for China. The US $700 billion bailout and the UK and EU versions are a futile attempt to prop up the $1.5 quadrillion derivatives bubble. Sensible economic policy starts with wiping out the derivatives cancer.
The interest of humanity can only be served by preventing the Washington conference from carrying out the plan outlined below. If Russia, China, and the developing countries can mount an effective opposition, the world will divide into two blocs - a pro-derivatives, anti-production Malthusian-monetarist bloc, which will tend to fall behind because of its own policies; and, on the other hand, an anti-derivatives, pro-production bloc of nations seeking modern technology, and the full fruits of scienitific and economic progress. Persons of good will in all nations are encouraged to mobilize to make sure that their own country joins the pro-production, anti-derivatives bloc.
Preparations the for economic summit in Washington on November 15 are well advanced. Here are the five points which are currently on the agenda to be adopted by the invited heads of state. The overall philosophy is to continue globalization by reinforcing free trade and by creating a world economic government under the IMF.
The IMF Program Reads As Follows:
1) require the credit rating agencies to be registered and monitored and submit to rules of governance;
2) halt the principle of a convergence of accounting standards and re-examine the application of the fair market value rule in the financial field, so as to improve its coherence with the rules of prudence and conservatism;
3) to resolve that no market segment, territory, or financial institution shall escape from a proportionate and adequate regulation, or at the least, surveillance;
4) set up a code of conduct to avoid excessive risk-taking in the financial industry, including in the area of compensation. Supervisors will have to follow this code in evaluating the risk profiles of financial institutions;
5) to entrust to the IMF the primary responsibility, along with the FSF (Financial Stability Forum - Basel), to recommend the necessary measures to restore confidence and stability.
The IMF must be equipped with the essential resources and suitable instruments to support countries in difficulty, and to exert its role of macroeconomic surveillance to the fullest. |
| Anonymous Coward
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11/12/2008 10:44 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
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NOV 14 - TS(will)HTF NWO BATTLE-LINES DRAWN
Quote
Summit Pits Bush Against Sarkozy-Merkel Global-Regulation Push
By Simon Kennedy and Michael McKee
Nov. 10 (Bloomberg) -- This week's economic-crisis summit will pit U.S. and Canadian support for free markets against European demands for greater state control.
In the middle will be developing nations that hold increasing sway over the future of the global economy and don't want the trade-off between regulation and economic expansion to come at their expense.
The leaders of the Group of 20 industrial and emerging countries, gathering Nov. 14 and 15 in Washington, will consider steps ranging from raising bank-capital standards to regulating hedge funds.
Their goal is to prevent any repeat of the irresponsible risk-taking that led to the worst erosion of credit since the Great Depression. ``Necessity is the mother of invention, and there's a real necessity now for more regulation,'' says former U.S. Treasury Secretary John Snow. The hard part is figuring out how much growth they are willing to sacrifice in exchange for greater economic security.
``Whatever changes are made will be long-standing, and so policy makers must be careful to make sure they are a net positive overall,'' says Tim Adams, a former U.S. Treasury official and managing director of the Lindsey Group, an economic-advisory firm in Washington.
The G-20 leaders' focus will fall squarely on banks and investment houses that ignored evidence they were miscalculating risk. That led them to lend to unqualified borrowers and place too much reliance on derivatives such as credit-default swaps, a financial instrument that functions as a kind of insurance for bondholders, to protect against losses.
Global Slump
So far, banks worldwide have been forced to write off about $691 billion in bad assets, creating a global credit crunch as they suddenly shut down lending, wary of losses. The International Monetary Fund last week predicted the economies of the U.S., Japan and euro region will simultaneously contract in 2009 for the first time since World War II.
While Adams is among those predicting a ``regulatory backlash,'' there's little agreement on what kind of or how much oversight would be needed to prevent another crisis.
French President Nicolas Sarkozy, who pushed U.S. President George W. Bush into convening the summit, is calling for increasing government control -- reaching across international borders -- over lending practices and investing.
``We thought everything could be solved by deregulation, free competition and the market,'' Sarkozy said last month. ``That's over.''
Financial Constitution
The French leader has support from German Chancellor Angela Merkel, who seeks regulation of hedge funds and curbs on bonus packages for bankers as part of a new ``constitution'' governing financial markets.
U.K. Prime Minister Gordon Brown has lobbied for improving cross-border oversight of the global financial system by placing the world's top 30 banks under the supervision of a panel of regulators.
Such ideas will find little favor with the lame-duck Bush administration. With little more than two months left before President-elect Barack Obama takes office, the administration has signaled it opposes any movement toward a global authority overseeing financial markets.
While European leaders have called for a ``new Bretton Woods'' -- a reference to the 1944 conference that established the post-World War II global economic system -- Canadian Finance Minister Jim Flaherty cautions against overreaching.
``We don't need to recreate the world right now,'' he said in an Oct. 31 interview.
Basel Accords
In any event, international supervision has its limits, says Charles Calomiris, a professor at Columbia University in New York who studies the global financial system. He notes that most major banks already subscribe to the so-called Basel accords, developed in 1988 and 2004 to create international standards for regulation, risk management and disclosure -- and those failed to prevent the recent crisis.
``We don't want more cooperation through the global apparatus,'' Calomiris says. ``We just want to regulate our banks more effectively.''
Subjecting financial institutions to more checks would rebuild confidence among investors, says Willem Buiter, a professor at the London School of Economics and former Bank of England policy maker. ``If it's done well, we can get greater stability. The risk is of doing too little.''
There is also the risk of going too far, with regulation that stifles innovation and raises costs. Requiring banks to hold more capital, for example, would mean less money available to lend to companies and consumers. Tighter regulation is one reason why ``potential growth is likely to be very subdued and substantially lower than in the past decade,'' said Joachim Fels, co-chief economist at Morgan Stanley in London.
Trade-Dependent
That's a concern for the leaders of trade-dependent developing nations, which benefit when industrialized countries are growing and buying their products.
``The prospect of regulation slowing a return to trend growth, and so hurting exports, is a worry,'' says Tim Condon, head of Asia research at ING Groep NV in Singapore. As for imposing tougher rules at home, countries such as China will want to maintain ``regulatory forbearance and flexibility as their economies slow,'' he says.
So far, the Chinese aren't taking sides. After meeting with European leaders Oct. 24, President Hu Jintao, who will attend the summit, said his country ``must first and foremost run our own affairs well.'' Premier Wen Jiabao, who also attended the meeting, said while more oversight may be required, ``we need to handle correctly the relationship between financial innovation and regulation.''
Lending Mistakes
Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong, says leaders of most emerging-market nations see little reason for stricter rules because their banks didn't make the same lending mistakes as western rivals.
That, along with their increased economic power, may give emerging countries more influence over the global regulatory response to the market turmoil, Maguire says. ``Whatever the solution to the crisis is, they are going to have a significant role.''
Jeffrey Sachs, director of Columbia University's Earth Institute and an adviser to governments around the world, says regulation should take a back seat to helping countries navigate the economic crisis. Developed nations could use the IMF or their own central banks to help provide safety nets for banks in emerging markets, he says.
``We need financial institutions that make sense for the challenges we're facing, not just an effort to fight the last war, which is what financial regulation would do,'' he says.
Divided Goals
Given the divided goals -- and the timing -- this weekend's meeting is mostly a chance for the Europeans to make their case and for officials to agree to meet again next year, after Obama's administration has taken over in Washington.
That means the summit isn't likely to be much more than the beginning of a debate -- let alone a modern version of Bretton Woods.
``This will be long-term,'' says Michele Fratianni, who studies the international financial system as a professor of economics at Università Politecnica delle Marche in Ancona, Italy. ``When you start talking about fixing things, with so many countries having different objectives, this will take some time.''
To contact the reporter on this story: Simon Kennedy in Paris at Skennedy4@bloomberg.netMichael McKee in New York at mmckee@bloomberg.net |
| Anonymous Coward
User ID: 548505
11/12/2008 10:45 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
King Midas
Sam Mathid
Nov 6, 2008
Of all the stories woven around the subject of gold, possibly the story of King Midas is the best known, whilst also being the least understood. Circa 700 BC, Midas was the King of Pessinus, the capital of Phrygia. Phrygia was a small but wealthy country within the eastern part of what is now known as Turkey.
The mythology starts with Silenus, the drunken satyr, falling asleep in the prized rose garden of King Midas. He was hauled before the court of Midas who, instead of punishing him, listened enthralled as Silenus regaled the court with amazing stories. As a half man/half goat drunkard, intent upon a life of pleasure seeking, he probably had some rather interesting tales to tell.
Silenus was the surrogate Father of Dionysus, god of the life force. When Dionysus found out what had transpired he was well pleased and offered to grant Midas one wish in return for his kindness. Midas asked that whatever he might touch would be turned to gold. Dionysus warned him of the dangers of such a wish, but Midas was blinded by his enthusiasm. Dionysus granted the wish.
From then on everything that Midas touched turned to gold including his beloved roses, and even the food and drink that he wished to consume. It was only when he inadvertently touched his daughter and killed her by turning her into gold that he finally repented his foolishness.
Full of remorse Midas approached Dionysus and asked that the wish be cancelled. Dionysus told him to bath in the water of the Pactolus River. This Midas did and the 'gift' was washed away. Incidental to this story is that the gold 'from Midas' was washed down-river to Lydia (in western Turkey), which around 660 BC was the site of the earliest gold coinage.
Modern renditions of the story of King Midas erroneously place all the story's emphasis on the folly of man's obsession with gold. That was most certainly not the intent of the fable. That sensible people valued gold highly was taken for granted. The intent of the fable was a theme common to Greek mythology... the inability of many people to think beyond the immediate and obvious.
The wonderful writer and economist Henry Hazlitt* follows the same theme when he points out that the problem with Keynesian economics is that it consistently fails to successfully predict, or even foresee, secondary consequences. Much like the child who insists upon eating large amounts of sugar lollies because they taste nice, and who fails to appreciate, until too late, that they have the secondary consequence of causing a very upset tummy.
Which point brings us up to the current economic situation. Our governing elites have utterly failed to manage the economy in a wise manner. The not only predictable, but blindingly obvious consequences of their own actions have left them open-mouthed and bewildered. It goes without saying that the moment that the economy is 'managed' then distortions and mal-investments will occur. But it is possible to manage an economy with a competence borne of an understanding of economics that at least minimises that damage. This has not been the case.
The economic mistakes that have destroyed America were borne of a pig-headed, Congressional arrogance that they, the wise and wonderful politicians, were right and that the classical economists and Founding Fathers were wrong. Gold and silver, the only real money, were replaced by pieces of printed paper backed by nothing other than the full faith and credit of politicians. How much more worthless can something get?
Once these pieces of paper were forced to be accepted in lieu of real money, then the process of inflating away the value of the new 'money' began. Three generations of Americans have had their wealth confiscated and reallocated to a governing elite via this process. These people worked their whole lives for a modern mythology known as the American Dream. What little they still have to show for a lifetime of toil is about to be lost. The ideas of Keynes are the anti-Midas in that whatever they touch turn to shit.
Differences of opinion are not unusual in this world, nor is that necessarily bad... sane people let results be the judge. For over 70 years the results of going off the gold standard, coupled with the fallacious doctrine of Keynesian economics, have caused massive destruction of capital and great hardships to the non-elites... not to mention the innumerable wars with hundreds of millions of deaths that blighted the 20th Century. Read Ferdinand Lips if that strains your credulity. Read. [pdf]
Keynesian economics was an unsophisticated dogma that failed to pay heed to the real world. Its adherents were not interested in whether or not it worked over the long term, they were only interested in whether it suited their own perceived short term interests. Its only virtue was in the immediate, and that was always enough for Congress. As long as the immediate would take them through to the next election, then all was fine. As long as it felt good and sounded good then the flimflam of Keynesian populism would suffice; never mind that nonsense about responsible economic management and heeding a dusty old document called the Constitution.
Our modern satyrs, Bernanke and Paulson have defended their actions by regaling Americans with wild stories about how it was all the fault of the free market. Under the auspices of a compliant Congress they have rammed through the sort of giddy 'solutions' that one would expect from those whose genes are half goat. Alan Greenspan, whatever his motives, succeeded in destroying the Federal Reserve in its current form. As there could be no more destructive form the man deserves credit for that.
I came across a quote by Benjamin Franklin recently:
"Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters."
I would strongly suggest that, to the contrary, people are generally virtuous until governed by ignorant 'masters.' Bad government will firstly degrade the currency and the laws and then (secondary consequences!), moral standards. It is not that people lack virtue and thus need masters, though it is convenient for the elite that people believe this to be so. It is masters who destroy virtue by idiotic edict that encourages and rewards criminal behaviour at all points of the legislative process. The morals of society succumb to rule by the idiocracy.
As our half men/half goat drunken elite perform their media rituals, the question needs to be asked whether "we the people" deserve any better. An observable rule is that in all aspects of their lives people do not get what they 'deserve', they get precisely what it is that they are prepared to put up with. That is a truth that applies down at the level of personal relationships right the way up to the type of government that we allow. Government is the problem, not the solution. Until we can see and understand that one simple truth, and make the decision that we will no longer put up with that situation, then humanity will continue to suffer the cyclical existence that ranges from impoverished serfdom to intermittent prosperity and back to poverty again.
The real theme of the old Greek fable about King Midas from 2,700 years ago is still most applicable to not only our governing elite, but to the American people. Yes, the immediate bailout legislation, forced down the throat of Americans, will hopefully lead to a continuation of the current comfortable lives that we have become accustomed to for a few months longer, but what are the secondary effects? The answer to that is as obvious and as unattractive as a drunken half man/half goat sleeping in a crushed rose garden. Will anyone haul these modern satyrs before a court?
Are modern Americans so complacent, or so intimidated that, unlike their forebears, they are prepared to put up with this? If the anger reaches the level of the street, will the military and police choose to support a Congress and presidency corrupted beyond anything that Jefferson could have imagined in his worst nightmare, or will they choose to support the Constitution? Will Americans believe the desperate, verging on pathetic excuse that it was somehow the non-existent free market itself that was to blame... that the crime was committed by laissez-faire capitalism? How gullible are Americans?
The answer to those questions will determine whether America goes the way of Phrygia and Lydia, where writers of the future will have to explain where it used to be on the map.
"Serf City, here we come... " (apologies to Brian Wilson and Jan Berry)
I look forward to seeing some of you in Canberra, Australia next week at Professor Antal Fekete's fifth and last session of Gold Standard University Live:
Expressions of interest in the event should be sent to: feketeaustralia@yahoo.com
Henry Hazlitt's 'Economics in One Lesson' is a wonderful and easy to read primer for anyone wishing to understand why it is that government attempts to help the economy inevitably have such disastrous consequences.
***
Nov 6, 2008
Sam Mathid
email: sammathid@yahoo.com |
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