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Monday, December 29, 2008

Washington, DC: Diminished Capacity.

In his editorial in the NYT today, Paul Krugman actually stated: "Our capacity hasn’t been diminished; our workers haven’t lost their skills; our technological know-how is intact."

I feel like we need Lewis Black after reading that claptrap: "bdabdabdabda....whaa?"

We've vaporized enough wealth in the last year to have paid off the entire $10Trillion national debt, and set sail on a course to double it instead. That's decreased capacity, Mr Important Economist.
Every citizen with savings has seen the earnings from them disappear....interest earnings that they can no longer spend, interest earnings no longer there for the State and Federal governments to tax: again, Nobel prize winning economist, an eight year old knows that's diminished capacity (DC).
The shadow banking system is a shadow of its former self and no business plan to reinvigorate it. In fact the very institutions that generated the majority of investment capital no longer even exist...how is that not DC? And the real Banking system is insolvent...again, DC; Washington: DC...Military prowess and respect: DC; students leaving college with $120,000 in debt: DC; armed with a useless MBA in Finance: DC; industrial infrastructure dismantled and shipped overseas: DC; workers on forced time-off without pay: DC.

Item after item, by any metric you wish to employ, the US capacity to do anything has been immensely diminished . You can't set out to destroy the middle class and not expect such a decrease; it's insulting to suggest otherwise. The US Upper Class has seen to it that their ability to enrich themselves without the onus of having those riches taxed is the only capacity that has not diminished, and with Summers, Rubin , and Geithner in the new administration, they've seen to it that it won't be in the future.

The Friedmanite-mare is upon us. You can try to perform the new job description of journalism of lying to our faces all you want, it won't disguise that fact, it'll only suggest that Paul Krugman?: DC.

Monday, December 22, 2008

Santa and the North Pole.

In years gone by, he'll tell no lie,
He put coal in many a stocking.
Though not his goal, the end result
Was really rather shocking.

To keep them warm, and make their dorm
a little more illuminous,
All those kids, in growing up,
Have burned all that bituminous.

But by degree, as all could see,
It made the planet cold less;
Which in effect, had one defect:
It left poor Santa homeless.

Thursday, November 13, 2008

Yes, there is a "They"...they are The Rich, and they own you.

In 1910, as quoted in The New York Review of Books, the ostentatiously arrogant Aristocrat, Frederick Townsend Martin, dangerously pleased with his own excellence, claimed,

"It matters not one iota what political party is in power or what President holds the reins of office.

We are not politicians or pubic thinkers; we are the rich; we own America; we got it, God knows how, but we intend to keep it if we can by throwing all the tremendous weight of our support, our influence, our money, our political connections, our purchased senators, our hungry congressmen, our public-speaking demagogues into the scale against any legislature, any political platform, any presidential campaign that threatens the integrity of our estate."

Of all the things that changed during the 20'th Century, that attitude is not one of them. The idle rich will destroy the very basis of their own ascendancy before ceding one iota of what they consider theirs. That is why we have revolutions and the carnage of World Wars, two of which have apparently changed nothing.

A case in point is made by the Centre for Economic Policy Research's paper on the Iceland financial debacle (apparently one's frowned on for using the more descriptive, alarming, "Crash": mustn't alarm the peasants), as published in their Policy insight newsletter # 26:

Even if the banks are fundamentally solvent (in the sense that its assets, if held to maturity, would be sufficient to cover its obligations), such a small country -small currency- configuration makes it highly unlikely that the central bank can act as an effective foreign currency lender of last resort/market maker of last resort. Without a credit foreign currency lender of last resort and market maker of last resort, there is always an equilibrium in which a run brings down a solvent system
through a funding liquidity and market liquidity crisis. The only way for a small country like Iceland to have a large internationally active banking sector that is immune to the risk of insolvency triggered by illiquidity caused by either traditional or modern bank runs, is for Iceland to join the EU and become a full member of the euro area. If Iceland had a global reserve currency as its national currency, and with the full liquidity facilities of the Euro system at its disposal, no Icelandic bank could be brought down by illiquidity alone. If Iceland was unwilling to take that step, it should not have grown a massive on-shore internationally exposed banking sector.

That last sentence is the kicker. The Rich knew this quite well. But in keeping with the Reaganite/Thatcherism creed of "Who cares? We're the Rich; we'll do whatever it takes to make us richer." That is, after all, the obvious, if you had been paying attention, Capitalist's Creed...or screed, if you prefer. If an entire country is destroyed by their machinations, they don't care, it's simply Friedmanitemare collateral damage; they don't suffer, they just take the money and run to the next economy that's doing well, and then work to enrich themselves whilst bringing that one to its knees ...  Next.

Why is this news?

John Kenneth Galbraith wrote, in his "Short History of Financial Euphoria" (dysphoria, more like), that "Recurrent speculative insanity and the associated financial deprivation and larger devastation are inherent in the system". This is a fact well-known by Wall St. financiers who use the knowledge to separate, not only fools, but quite a lot of other people, from their money in a heady daze of speculative euphoria ... that's their job. Not to make sure that your 401, or Calpers, or DB (defined benefit) pension fund, or State-insured (by failed institutions such as AIG) pension fund, assures you of a secure retired future.

Why is it news that their allegiance is to the rich? Why are we shocked when we see, decade after decade (1987, 1997, 2007.... what do we need.... a 2x4 to the head?), they skim off the profits accumulated by a shrinking middle-class to stuff their pockets with and fund another bubble in another country, impoverishing them in turn before they turn to the next victim?

Realize this: You have no pension ... all that you've saved all your life is not yours ... it's theirs:

"....we got it, God knows how, but we intend to keep it".

Tuesday, November 4, 2008

Time for Regime Change.

Asia Times online editorial for election day. Every one agrees we need a change from the Bush putsch.


Front Page
Nov 5, 2008


EDITORIAL
Send off the clowns

It is not our place to tell Americans how they should vote. Their concerns are health plans, taxes and, suddenly, socialism. That's their business. We can however tell them what America looks like to us, and it's our business, because America is a 800-pound gorilla in our patch of jungle. We need the gorilla because it helps sustain our ecosystem by consuming stuff we make but can't use ourselves. But for the past eight years our gorilla has been acting like a crazed thing, bringing wars and economic catastrophe. Its antics have made it a pariah and worse - a laughing stock. It's a gorilla that wears a big red nose, a frizzy wig and oversize shoes.

It looks to us like the gorilla has been trained by a bunch of clowns whose goal is universal domination rather than universal


good. Power for its own sake, at any price. It doesn't seem to us that even Americans have benefited from their rule - we see your financial ruin, your war dead (the dead they don't let you see), the wars you are still waging at monstrous cost and without a chance of winning, and we ask: Who has benefited? We see only a growing troop of militant Islamists, chittering with glee, a clan of America's business elite whose greed and excesses have been rewarded with a free lunch, for which you are paying, and a tribe of military industrialists, enriched by your taxes.

These clowns are not stupid. They are experts in the arts of bamboozlement. They won and held power by cleverly manipulating you through sophisticated use of your media and political trickery. Fear and greed: they gave you the former and satisfied the latter, instilling in you fear of a bogeyman under your bed and allowing asset bubbles to inflate to bursting point. Having taken power, they understood they could lie to you with impunity, and so they threw in a few whoppers like Saddam Hussein's weapons of mass destruction.

Now they are telling you that only they and their ilk can save you from the results of their own hubris. They have given you something new to fear: Barack Obama is a socialist! As if they themselves had not abandoned their free market doctrine when it no longer suited them and are now busy using their remaining time to redistribute wealth - giving your wealth to their buddies. The frightening thing, to us, is that so many of you are still listening to them without asking yourselves whether the trainers who cracked the whip at George W Bush are not the same ones who will crack it at John McCain.

Our plea from our patch of jungle to you is: Please look at the big picture. We are part of that big picture, and we need a sane, healthy gorilla, not a pathetic megalomaniac. It looks to us like you do, too.

Allen Quicke is Editor of atimes.com

(Copyright 2008 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

Monday, October 13, 2008

It's an Energy crisis, stupid.

William Cristal, one of Milton the Monster's acolytes, was on NPR today whining that no one could have seen the financial debacle brought about by the neocon morons' attempts to shrink government by enlarging the private subcontracting government-trough industry to such an extent that the ballooning of government employees, simultaneously with that of the shadow economy of government lobbying, contracting, bureaucracy and "representation" (ie actual members of Congress and other positions of government "service"( only in government does service mean helping yourself)) is the only game in town for anyone looking for a secure future.

And it is secure. Under the radical rule of the neo-cons (they're neither), all responsibility is transferred to the private sector, which always simply demands more cash to do the job it was hired for but is incapable of doing, as, being the private sector, its only responsibility is to grow and make more money for its share-holders, leaving the tax-payers, on whom it parasitically depends, sucked dry; hopelessly drowning in debt.

The list is well-known:

After the WTC bombing, the National Security Adviser, Condoleeza Rice could sit in front of Congress and the American people and declare that she never discussed aircraft flying into buildings, despite a movie with that plot, a threat against the White house during the Nixon presidency, a warning from the CIA, and dire prognostications from Clarke. She should have been fired on the spot....anyone in private industry would've been out the door for such egregious dereliction of their job function. But our public servants no longer consider doing their job as part of their responsibilities: on all levels of government, collecting their paychecks is the only job description they take seriously.

The next outrageous example, is of course, the Iraq War. Warned by numerous voices, but most accurately by Robert Fisk, of the consequences of an Iraqi invasion, they ignored or suppressed anything that did not speak of a "cakewalk" through Iraq. Never did they mention to the Citizens of the US that their plan was to completely destroy the infrastructure of Iraq, and then award multi-billion dollar no-bid contracts to complicit US firms to rebuild it...not that you would have cared one whit if you had known. Here in the "Home of the Brave", we're ruled by our fear and greed. Whenever satisfying the monumental greed of the Ruling class is threatened, they simply stoke the fear of the populace to a red alert level, and we gladly cede to them whatever they demand, in sheeplike acquiescence.

It's no wonder the only way we can instate a Demockracy is at the point of a gun, and then only after having reduced the target country to a pile of rubble. In both of the wars in which we are now engaged, each country had already been pummeled by more than a decade of United States' war-mongering, reaping huge profits for the arms industry...but that wasn't, never is, enough. Here in the land of the brave and the home of the free, we're used to complete immolation of the native population and utter capitulation to our need, our right, to plunder their resources for our enrichment and comfort.

That's why the warnings to desist are, again and again, beforehand ignored; in retrospect, denied.

Next, a related warning, but nonetheless separate, was what the Iraqi War would cost. The voice in the Bush administration that told of the true cost of the war, pretty much to the penny, was summarily dismissed. The pattern is the same time after time. those in disagreement with the idiocy of Washington are marginalized so that their voices are muted, and then, once the crisis strikes, the warnings are, William Cristal-like, denied.

Katrina followed the exact same pattern...warnings ignored beforehand, in retrospect denied, and the profiteers move in to reap their gains, while government aids and abets them and abandons its citizens to their depredations.The next catastrophe, which will follow the same pattern of denial is already apparent, as the real cause of the financial crisis is ignored. Peak Oil Production is the POP no one heard when the credit bubble burst.

That's because the same dynamics are at play. Those warning of the impending crisis are currently ignored and marginalized, and when the catastrophe strikes, they'll be relegated to the sidelines as impotent. Nouriel Roubini is the prefect example. While that clueless buffoon Ben Stein is still printed in the NYT, and Paul Krugman wins a Nobel prize in economics, Roubini is saddled with the "Doctor Doom" moniker and considered a mere curiosity, despite having predicted not only the timing, but severity of the current financial disaster.

All so the racist undercurrents of the US are free to play their part in assuaging the country's conscience, so they can convince themselves all's fine, we're voting McCain in because he's best for the country, not because we'll do anything rather than elect a black president; even vote for our own doom. We'll even do that....just watch....but, please...DON"T whine that you didn't see it coming, or "who could have Known?" You all know....You all see it....but it's the path you'll choose. Anything's better than voting for a nigger. And because that's what you feel, the fate you're so casually walking into, as casually as you cakewalked into Iraq, is going to reap the same whirlwind. Because what's been promised by McCain is all War...all The time...for the rest of our Patriot Act-ruled lives. He suffered for his country, and so godammed it, will you. That's one ppromise a McCain presidency will keep...count on it.

But that's OK...as long as it's still the White house.

Thursday, October 2, 2008

Quoting Mike Rapoport of Dow Jones Newswire, Julian Delasantellis says, "Wachovia Bank, just bought out by Citicorp for $2 billion, had on its last day on its ledgers assets with a book value of $75 billion", and goes on to say that, "Maybe its not that asset values are too low - maybe the entire crisis is the markets telling us that they're too high". To which I can only reply, "Bingo".

While many point the accusing finger at minority borrowers who took out loans they couldn't afford, they were, many of them for the first, and what may prove to be the only, time in their lives, given access to sums they couldn't even begin to wrap their minds around, by "experts" who cajoled them with blandishments about "the ownership society" and "The American Dream".

These experts were, many of them, new to the business themselves, they took their cue from the likes of Mozilo, Fuld, O'neal, and Prince, Charles who played the music to keep the dance going. That dance being the Chicanery Waltz, a ponzi scheme contrived to fool the citizens of the US and the Central Banks of the world, that the imploding US economy, stripped of its manufacturing base, inflicted with middle-class expectations, even while straddled with a shrinking lower class income, and facing an inevitable crisis from the advent of peak oil production, was really robust and "resilient". It was neither.

What it was, was an economy thought by the cognoscenti to have too much money in the hands of the government and the hoi polloi, and this was what the Friedmanites were, and are, hell-bent on changing by, for one thing, scuttling Social Security, and siphoning its wealth, accrued by that very same government they purport to despise's ability to tax its citizens, into the hands of the rich financiers on Wall St. to underpin their failed dystopian dreams of a Spree Market, wherein all the wealth of the nation flows into their hands and is then disbursed to their investments in far-flung lands, leaving the populace, whom they despise and denigrate as morons, bereft of their life's savings (their definition of "Freedom" ... you're no longer encumbered by those nasty, onerous investments), without healthcare, and helpless to stop them, as we will be too old to recoup our losses.

Instead, they "free up" those savings to invest in factories and manufacturing facilities overseas, protected by the military you pay for through taxes on those now lower-paying jobs. Naturally the value of the US economy, now bereft of its productive capacity, can only diminish going forward; so a new paradigm needs to be invented to put lipstick on the slaughtered hog.

It wasn't for nothing that Greedspan was called the "Maestro". Out of thin air he created liquidity and increased affordability for housing by suppressing interest rates below the inflation rate, making all those poor "cheaters", who are now being accused of taking a loans out they couldn't afford, into houses they couldn't afford, because the real value of their savings were being sapped; money they couldn't afford to lose. The so-called negative savings rate is always blamed on bloated, selfish American greed, but that's a lie. By lowering the interest rates to less than the inflation rate, the citizen's of the US were having their savings slowly bled away from them. In an act of desperation to maintain some token of security for their future, as they watched the attack on Social Security as the Number one Mandate of the 2'nd Bush term, leaving them facing an old-age with no resources, they grabbed the lifeline held out from the sinking Titanic: the flailing ARMs.

Even if they couldn't afford the houses, they were told, they could always sell them when the day came, for a profit, getting a 20% annual return. Instead of their savings disappearing year by year, they would grow. The stark choice facing them, given that they had no pension, no Social Security, and no healthcare, was penury or a chance to not only have a vehicle for saving, but a place to live ... the choice was a no-brainer, as the smartest men in the room like to say, whenever they want to make you feel stupid for not taking their sage advice, yet leaving themselves enough plausible deniability. With MBIA's current lawsuit against Countrywide, we'll see just how plausible that deniablilty is in a court of Law.

This is why the markets are telling us that the property prices in the US are too high, because they've been artificially heightened to perpetuate the illusion of American Exceptionalism. But no such exceptionalism exists. The US is bound by the same laws of economics as the rest of the world: if you strip the middle class of its assets, which is what selling off the fruits of decades-long of a Democracy's labor to private interests is, then the value of that economy decreases, it's productive capacity sapped, the welfare of its citizens diminished.

As Adam Smith said in "The Wealth of Nations":
"The scanty maintenance of the laboring poor is the natural symptom that things are at a standstill, and their homeless condition that they are going backward".

The Fed can pour as much borrowed money into the pockets of the financiers that it wants to, but to the foreign lands from which those funds must flow, it has become undeniably apparent that as the onus of repaying those monies must be borne by an increasingly impoverished citizenry, the words of Adam Smith will again ring true. But, the US having already squelched on billions of dollars of their obligations, they will be different words:
"...all borrowers are put on the same footing as bankrupts, or people of doubtful credit, in better regulated countries (italics mine). The uncertainty of recovering his money makes the lender exact the same usurious interest which is usually required from bankrupts." But since those interest rates of the Central Bank regime are set to decrease, the real interest will be paid by way of higher inflation rates, even as the value of assets continues to decline, leaving the specter of a deflation running, thanks to the miracle of globalization, concurrently with a raging commodity price inflation. Welcome to the Friedmanitemare...don't worry about those troops in the street, they're there for your protection.

He goes on to state that among the barbarous nation the enforcement of contracts (read Credit default swaps) was left up to the contracting parties, which was the cause of the high rate of interest which took place in ancient times. Well, the barbarians are no longer at the gates, they are in the citadel. Which is why the Libor and Euribor are at historic highs.

Liberation from the regime of dollar hegemony must come from sovereign nations withdrawing from the global central banking system to return to national banking within a world order of sovereign nation states where monetary policy plays its proper role supporting national development goals, rather than sacrificing national development to support a network of oligarchies through transnational wage-suppression, export-led growth, and market manipulation via serial credit bubbles and Ponzi schemes designed to entrap the entire population in a web of debt, that eventually becomes apparent as nothing more than a web of lies.

Thursday, September 25, 2008

Fried Man Economix

Coincidentally, I've been reading Naomi Klein's "Shock Doctrine", which outlines the steps taken by the Chicago School of Economists to undermine and replace the economic systems of Chile, Argentina, Poland, and Russia with radical Milton Friedman Free-for-all Market economies. The step of allowing Lehman's to fail, and the completely predictable ensuing chaos that would entail, giving the chance for the Treasury Secretary to step in and claim monarchical powers (Nouriel Roubini was the 1'st to recognize this, when in response to the plan he remarked, "This is not A Monarchy"... hah! it is now, buddy) is only the first step in a tried and true formula for a financial coup d'etat:

In the 1'st daze of the Bush administration, he asked for the privatization of Social Security, needing approximately $1-2 trillion to do so:

$700 billion...proposed b/o pkg
$438 BD (budget Deficit)
$200 Fanny Mae;Freddy Mac
$160 Rebate checks
$85 AIG
$29 BS bailout...sounds cheap now, eh?
-------------------
$1.6 trillion

and it ain't over yet....oh, and nowhere in those numbers are the cost of our wars included, nor the increase in interest payments that an additional couple of trillion dollars'll add to the deficit.

The exact amount of the bailout requested as a boondoggle to Wall St by infusing it with the avalanche of cash from the "privatization" of Social Security.

Just as he financed his war via the tax receipts of the Wall ST. Robber Barons, he's repaying that favor now, since the ruse to infuse them with American Workers' savings failed.

But that's just my opinion....I could be wrong.

But even to a clueless economic observer like me, the inevitability of this "crisis" has been well-known, documented and a cause for concern for at least six years ... yet if you look at what's happening with Paulson's bailout plan, you'd think the administration just realized there were problems with the economy yesterday.

Feeling guilty about not following the economic system as it was milked to death by scheming fraudsters? I recently signed up for Nouriel Roubini's RGE monitor, as I thought his prognostications were right-on years ago. This is what I got (this is just one e-mail):


Greetings from RGE Monitor!

Check out all the great contributions that RGE has published this past week: Nouriel Roubini's Global EconoMonitor, RGE Analyst’s EconoMonitor, U.S. EconoMonitor, Emerging Markets Monitor, Global Macro EconoMonitor, Finance & Markets Monitor, Asia EconoMonitor, Latin America EconoMonitor and Europe EconoMonitor.

On Nouriel Roubini's Global EconoMonitor there are four ground-breaking pieces.

In the first, Nouriel explains that the lack of debt relief to distressed households is the reason why this financial crisis is becoming more severe and why the economic recession - with a sharp fall now in real consumption spending – is now worsening. One way of solving the problem is by creating HOME (Home Owners’ Mortgage Enterprise). In order to understand the idea behind HOME you should read: “We need a new HOLC - more than a new RTC or RFC- to provide massive debt relief to the household sector. We need to create the HOME (Home Owners’ Mortgage Enterprise).”

The second important piece by Nouriel Roubini discusses the demise of the shadow banking system. Among other things, he argues that the next steps of the collapse will be the run on the short term liabilities of hundreds of poor performing and highly leveraged hedge funds and the collapse of highly leveraged LBOs following the recent bust of the private equity bubble. Read: “The Shadow Banking System is Unravelling: Roubini Column in the Financial Times. Such demise confirmed by Morgan and Goldman now being converted into banks

Nouriel’s third analysis poses an important question as to whether one or more systemically important funds could go belly up and lead to systemic shocks. In his view, even as no major player today is as leveraged as LTCM was in 1998, many of these funds are much larger than LTCM. So while until now the financial crisis has been concentrated among traditional banks, broker dealers and their off balance sheet structures (SIVs/conduits) one cannot rule out that some systemically important hedge funds may get into trouble with systemic consequences. Read: “The unraveling of the Shadow Banking System moves to hedge funds as Schmalpha replaces Alpha”.

Nouriel’s fourth piece defends the creation of HOME and offers a detailed explanation of the 10 steps in this HOME proposal to resolve this most severe financial crisis. Read: “HOME (Home Owners’ Mortgage Enterprise): A 10 Step Plan to Resolve the Financial Crisis

Also don’t miss the replay of his most recent conference call, where he discusses the path that led us to this current crisis and the way out of it. Listen to: “Financial Crisis and Recession: The Worst is Ahead of Us
On the RGE Analyst’s EconoMonitor Elisa Parisi-Capone details “The demise of the shadow banking system” Lehman’s default – a systemic event that forced a systemic solution – was the pivotal event that triggered a rapid succession of interventions.
Ayah el Said and Rachel Ziemba review the “Fallout of the Global Financial Turmoil in the Middle East” arguing that the region is not, if it ever was, immune from global trends with various home grown liquidity vulnerabilities exacerbated by global trends. Rachel Ziemba also reviews the recent performance of Singapore’s Investment Fund, GIC. See. “SWF Watch: Government of Singapore Investment Corporation (GIC)
In U.S. Housing Retention Bill: How Effective in Stabilizing the U.S. Housing Market?, RGE Monitor analysts Arpitha Bykere and Christian Menegatti discuss the U.S. Government’s Housing Retention Bill to refinance mortgages of at-risk homeowners. They argue that this will largely be ineffective in containing the ongoing home price correction, the excess overhang of homes, and will have little impact on mortgage default and foreclosures.
On the U.S. EconoMonitor authors questioned the efficacy and fairness of the government's bailout measures. Tim Duy focused on a blind spot in the myopic bailout plan: "This program will actually reduce regulatory capital as losses are realized. Even after the bad assets are removed, the affected firms still need to be recapitalized, presumably via taxpayer infusions...Try as policymakers might, they cannot forever ignore the fact that we are not Japan; we do not have excess domestic savings to fund such a program...If the Bank of China continues to be a dominant financier of US excess, they have found a way to dominate the US in a way that could never have been achieved militarily. What is the alternative? A tax increase? Tell Americans six weeks before an election that they need to accept a lower standard of living?" See “Fed Watch: Friday Can’t Come Soon Enough“.

How to recapitalize and with whose money are two of the major points of contention in the bailout. Fabius Maximus raises the question of whether taxpayer funds will go into the pockets of insiders, as they did with the Resolution Trust Company and the Iraq War. Fabius Maximus lists these and other bailout concerns in “What do we know about the financial crisis? What are the key questions?”.

In “The Bailout of All Bailouts is a Bad Idea”, Robert Reich reminds policymakers "to pay adequate attention to the people whose wallets really keep the economy going, and who merit more help than the Wall Street tycoons whose carelessness and negligence have put it in such jeopardy."

In ”Financial Meltdown Reshaping Wall Street”, Elisa Parisi-Capone and Christian Menegatti frame the unknowns surrounding Lehman's bankruptcy and the fate of off-balance sheet toxic waste.

Also on the U.S. EconoMonitor this week:
What Wall Street Should Be Required to Do, to Get A Blank Check From Taxpayers by Robert Reich
The Fed giveth, and the Fed taketh away by Tim Price
CEO Clawback Provisions in the Bailout? by Barry Ritholtz
High priority report: a geopolitical sitrep on the financial crisis by Fabius Maximus
Why Paulson and Bernanke are only Partly Correct, and Why Main Street Needs More Direct Help by Robert Reich
The Allure (and Risk) of Silver Linings by James Picerno
Latest Bailout Plan Spin: Its a Money Maker! by Barry Ritholtz
A matched preferred stock plan for government assistance by Charles Calomiris

On the Emerging Markets Monitor Jelena Vukotic develops an interesting analysis of the geopolitical risks within the Eastern European region: “Recognition Practice and Geopolitical Risk in Eastern Europe: Georgia, Kosovo and Beyond”. Nirvikar Singh points out that “The current crisis in the US does not mark the end of financial capitalism, as some windy observers have claimed”. Finally, Steve Keen writes that “We've only just begun” , discussing the seriousness of the subprime mortgages issue and the potential risks to American households.

Also on the Emerging Markets Monitor:
Why You Should Hate the Treasury Bailout Proposal by Yves Smith
Morgan Stanley, Goldman to Become Banks by Yves Smith

This week in the Global Macro EconoMonitor Jeffrey Frankel argues that if Paulson’s $700 bn plan is going to provide capital to financial firms, the government should get a share in the banks’ ownership to prevent all the gains of the rescue plan accruing to people who made the mess in the first place. Read “An Emerging Consensus Against the Paulson Plan: Government Should Force Bank Capital Up, Not Just Socialize the Bad Loans”.
In “And Now the Great Depression”, Barry Eichengreen draws comparisons between the current financial crisis and the Great Depression and differentiates the causes and consequent policy responses of the ongoing crisis with those of the 1930s.
In “Falling Back to a New Redoubt”, Daniel Alpert argues that the government should focus on recapitalizing the banks and dealing with the continued decline in home prices and consequent mortgage default, and offers suggestions on how to make Paulson’s bailout plan more cost-effective.
In “FDIC Won't Run Out of Money, But WaMu May be Toast”, Chris Whalen reiterates that the deposit insurance fund is an accounting entry with the U.S. Treasury with the FDIC fund showing how much cash is contributed by the banks to support the deposit funds and the Treasury advancing the cash needed by FDIC to address bank failures and making the deposit guarantees.

Also on the Global Macro EconoMonitor this week:
Capitalism and Skepticism by Christopher Carroll
Ban on Short-Selling Will Hurt Rather Than Help Broker-Dealers by Yves Smith
Closing Comments September 19 2008 by John Jansen
Moral Hazard Misconception - Part 2 by Ricardo Caballero
A new sitrep, as we move into phase 3 of the financial crisis by Fabius Maximus
Fixing Housing & Finance: 30/20/10 Proposal by Barry Ritholtz
Essential steps to surviving the current crisis by Fabius Maximus
The Mystery of Capital Flows by Sebnem Kalemli-Ozcan
A vital but widely misunderstood aspect of our financial crisis by Fabius Maximus
Implications of Repricing of Dollar Denominated Assets by Menzie Chinn
What To Do (and Not To Do) In A Financial Panic by Christopher Carroll
A Desperate Struggle for Perspective...Againby James Picerno
A Simple Explanation of What Went Wrong by Barry Ritholtz

On the Finance & Markets Monitor, Daniel Gross proposes a put option format for calculating the value of outstanding RMBS contracts. Read:”‘No recourse’ and ‘put options’: Estimating the ‘fair value’ of US mortgage assets”.

According to Mark Thoma’s calculations, the value of subprime related securities may very well be close to zero. In “Who Should Pay for the Bailout?” The same author advocates that the government should implement a rescue plan as soon as possible, and that there should be a progressive tax system put in place, so that those who did not contribute to the credit crisis do not end up paying for it. The “Paulson bailout” by James Hamilton stipulates that modified capital standards and more stringent risk management procedures should be a requirement for any firm participating in the government bailout. In”Why Paulson is (maybe) right” Charles Wyplosz analyses the Paulson proposal and agrees with much of what has been done so far. However, the final judgment of the bailout’s efficacy will have to wait a few years, when the RTC has unloaded the currently toxic mortgage securities.

The idea that Paulson might be right is not a consensus. Indeed, for Luigi Zingales, the government should not bail out the financial industry. Read” Why Paulson is wrong”. For Zingales, the government should force the creditors to restructure, with part of the debt forgiven in exchange for an equity stake or warrants.

Then, in “Crack Addicts and Bubble Markets” Joseph Mason describes the current situation as an “’asymmetric information’ crisis”. He then proposes greater transparency as a solution, both for rating agencies and for accounting regulations. He also has qualms with the current bailout approach proposed by the Fed. In:” What is to be Done?: Interview with Bert Ely”, Chris Whalen conducts an in-depth interview with Bert Ely, a foremost banking expert and lobbyist, about the bailout and the overall state of the banking industry.

Also on the Finance & Markets Monitor this week:
The Unitary Federal Reserve - Crisis Choreography by London Banker
Some Thoughts For September 19 2008 by John Jansen
Terror Attack on US Financials? Details of SEC Short Ban by Barry Ritholtz
SEC Induced Mother-of-All Short Covering Rallies by Barry Ritholtz
When blatant government market manipulation won't help you... the Run on Morgan Stanley by Reggie Middleton
Ameribank: the latest FDIC bankruptcy takeover by Edward Harrison
"Non-Reviewable" - Sometimes there really ARE conspiracies by London Banker
News round-up: 21 Sep 2008 by Edward Harrison
October 18, 1930: NYT on Short Selling by Barry Ritholtz
America appoints a Magister Populi to deal with the financial crisis by Fabius Maximus
Opening Comments September 22 2008 by John Jansen
Opening Comments September 23 2008 by John Jansen
Wall Street, R.I.P. Now What? by James Picerno
Housing Prices: How Far to Go until Bottom? by Menzie Chinn
Banking Expert: Bailout Not Necessary, Industry Can Take Losses by Yves Smith
The Liquidation Trap by Thomas Palley
Main Street or Wall Street? by Mark Thoma
How SEC Regulatory Exemptions Helped Lead to Collapse by Barry Ritholtz
Illiquidity versus Insolvency by Paul Kedrosky
Libor-OIS spread at an all-time high by Edward Harrison
Opening Comments September 25 2008 by John Jansen
The Right Financial Fix by Laurence J. Kotlikoff

On the Asia EconoMonitor, Takeo Hoshi suggests that the government’s comprehensive plan is a welcome step but that it lacks any clear government approach on (near) insolvency of large financial institutions. Read “The Cure for the U.S. Financial System?” He also describes how the failure of Lehman produced serious problems in credit markets not only in the U.S. but also in Japan where the repo market collapsed. See “Lehman Shock and the Japanese Financial Markets

In “Some Random Thoughts on the Chinese Yuan” Yin-Wong Cheung argues that pushing China to keep appreciating its currency, without other complementary policies in place, can bring more harm than benefits to the global economy.

Also on the Asia EconoMonitor:
Worrying about the banking system by Michael Pettis
Markets surge, but little has improved by Michael Pettis
Japan’s New Prime Minister and Economic Reform by Takeo Hoshi

On the Latin America EconoMonitor we have three outstanding contributions. The first two deal with different aspects of the Paulson plan and discuss how it might affect Latin countries. Read “A Short Note on the Banking and the Banking Crisis in the US” by Antonio Carlos Lemgruber and “The Paulson Plan, Money versus Debt, and the Reversal Auctions” by Luiz Cezar Fernandes. The talk of Latin markets this week has been broader than the Paulson plan and has included the fact that Argentina might offer the holdouts a proposal to pay the debt outstanding. If you want to get a better grip on the holdouts and Argentina, we recommend the latest piece by Eugenio Diaz Bonilla: Some Reflections on Argentina’s Debt Restructuring .

Also on the Latin America EconoMonitor:
Lack of Infrastructure Investment in Brazil: A Constraint on Economic Growth by Vitoria Saddi

On the Europe EconoMonitor Ulrich Fritsche and Georg Erber discuss the slowdown in German productivity. In their view, the extraordinary export performance and competitiveness of the German economy was mainly driven by massive wage restraints and not by productivity gains. Read “Labour productivity growth in good old Germany: is Germany falling further behind?

As Russian equity markets plummeted in recent weeks, conspiracy theories circulated that Washington was egging on American financiers to punish Moscow for its actions in Georgia. Fabius Maximus argues that even though these rumors are most likely false, they signal that the possibility of financial warfare is on the minds of key people. Read: “Rumors of financial war: Russia vs. US

Also on the Europe EconoMonitor, Daniel Gross and Stefano Micossi argue that $700bn nationalization of US financial institutions helped save so far many overleveraged Europe’s banks, whose total liabilities in some cases amount to or exceed their countries’ GDPs. For them the solutions for the large institutions can no longer be found at the national level and hence it seems apparent that the European Central Bank will need to be put in charge. Read “European banking on borrowed time”.

That's just from one site. I like to read prudentbear.com, Naked Capitalism, Charles Kingsley Michaelson's, "Someassemblyrequired", Atol, not to mention the NYT and other pubs....this is just impossible. No wonder we're a nation of addled idiots.

Friday, September 12, 2008

Watching Your Future go down the Drain.

Sure feels like Friday the 13'th, luckily it comes on a Saturday this month. The natives are abuzz with talk of the imminent demise of WAMU, AIG, or Lehman's, the logic being, that if the Fed had to take over Fanny and Freddy, whose assets are known to be of a higher quality than most, then what does that say about the garbage held by those scumdogs at Lehmann's, or Wamu?, who was giving loans at the Mexican border ... well, for a fee, let's not get ridiculous.

But all the talk is of how to get back to where we were, or how to profit in a declining economy, how to ride peak oil to vast riches, alternative energy can make you rich, gold is going through the roof, dump dollars and buy foreign currency, all micro-plans based on your own scheming and oblivious of what directions the New Economy is taking us. This New Economy means deprivation and want and lower expectations, as the results of the Smartest Men in the Room being allowed, under the rubric of "Free-Market Fundamentalism" to rig the economy of the Triumphalist United State of America to siphon the productive capacity of the entire globe into their own pockets, so the demand for yachts would sky-rocket, making them invest those dollars, wrung from the sweat of Chinese peasants, into production facilities to make even more yachts and other useless baubles for the Paris Hiltons of the world to flaunt in our face, as we, fools that we are, applaud their "achievements".

The real New economy will reflect the devastating costs of trillions of dollars in malinvestment for Real Estate and defense spending on which we've squandered the output of the productivity of an entire generation to maintain the vanity-driven car culture to this crescendo of madness. The US has  inflicted the world with a mania for auto motion. It affects every sinew of the global economy. Because the real heart of the economic dilemma is that the staggering cost of the transportation system in terms of infrastructure, resource depletion, healthcare costs, (not even including those that result from the carnage from "accidents": they aren't; they're built-in, as intractably as unemployment is in the economy), and the militant mind-set it fosters, is now being added to the fact that the import bill for autos themselves is rising faster than that of oil, as the US automakers continue to offer gas guzzlers. Let's face it, that's where the high margins are; that's what they want to make and sell, using "supply-side" economix: make it and they will come.

Although no one believes it, that was the plan all along. Such was obvious from inside the computer industry. As industry after industry spent billions to enhance their IT infrastructure to enable them to rid themselves of all those nasty pesky employees and run them with a permanent skeleton crew, the entire manufacturing infrastructure was reorganized to set in place facilities to serve the needs of the wealthy, by offering luxury goods like SUV's and refrigerators the size of yachts to a citizenry persuaded, and foolishly obliging, to pull "savings" out of their homes and spend it on the "American Dream" of constantly expanding expectations of living off the fat of the ravaged land while the countries that supply them with all the cheap crap provide hordes of enslaved labor to sustain the gluttony and stoke the greed.

The results of which is that we now have an auto industry (and this is just one example in one industry in one country: globalization has had the effect of retooling factories worldwide to supply the Rich, the needs of their own citizens not presenting the high-margin profits demanded by their foreign investors) completely incapable and unprepared to manufacture vehicles the marketplace can afford, since all their plants have been tooled to provide cars to the rich, whose ranks have shrunk dramatically in the last year, and are shrinking even more dramatically now. Because as the Government hails the so-called 3.3% growth rate of the 2'nd quarter, not a single comment has been made about the fact that the unemployment rate is accelerating as the economy grows, so what's going to happen to the unemployment rate as that growth inexorably turns negative? You'll get the answer to that question in the form of a pink slip.

Tuesday, August 26, 2008

Summer of Missed content.

Too much Crack and Cable: facing an unclear winter of discontent.

It's being reported in Bloomberg that Stuart Thomson of Resolution Investment Management Ltd. said: "The banking system relies on trust and at the minute there quite simply isn't any.'' Meanwhile, Larry Summers, whose frightening aspect is reminiscent of Star Wars' Jabba the Hut, warns: "The next administration faces the prospect of having to make the most consequential international economic policy choices in a generation at a time when the confidence of governments in free markets is being increasingly questioned."

Of, course, what he really means is confidence in "Regulation-free Markets", which is not the same thing. Summers is famous for his stark blandishment, made in 1991 while at the World Bank, that developed countries ought to export more pollution to developing countries, such as China, because those countries would incur the lowest cost from the pollution in terms of the lost wages of people made ill or killed by that pollution due to the fact that wages are so low in developing countries. He further stated that, "the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that" (ie rake in huge profits from it to enrich ourselves and ensure our continued full spectrum domination of the econo-sphere). The Netherlands, by the way, got caught doing exactly that: dumping horrible toxic sludge in Nigeria, last year, after shipping it around for weeks to cover their tracks. But like our financial geniuses, they got caught with their pants down...and if you've seen the Wall St. boys, you know that can't be a pretty sight ...talk about toxic waist ... eewwww.

Beijing smog

So what might those policy choices be, we ask? Even after the fall of Summers from his position at Harvard and now that he and Scholes, (that other Master of the Universe who brought us the LCTM debacle, which started the whole Greenspan-led Fed precedent of gross interference with the still-called Free Market every time the Spoiled-Brat-Frat Rich-Boy Club brings it to its knees using it as their private gambling Casino), are still asked their opinion, it's plain they're feverishly working in the background to kluge together another graft to their money tree, replete with loopholes they can use to continue to game the system for their own aggrandizement.

It doesn't augur well this time around. And the reason is what Stuart Thomson's states at the beginning of this post: Trust. The world held its breath as it marveled at the spins and loops of the economic roller-coaster, as long as the party kept going and they were making money. But now that it's been revealed to the world the sheer scale of the losses with which Wall St., abetted by their cronies in Washington, (and London, Berlin, ... Hong Kong) intends to stick them with, they're not so anxious to pony up for the next hair-raising hair-cut. Now that caveat emptor's been rewritten to the unabashedly blatant, "Step right up, Suckers", they've lost their appetite for being Wall St.'s saps.

Good luck boys. But methinks that what Yu Yongding, the former adviser to China's Central Bank, said about the impending implosion of the two Enron-style SIV's we refer to as Freddy Mac and Fannie Mae, is spine-tinglingly apropos: "...it's catastrophic. It's the end of the current international financial system".

Sleep tight America, now knowing that the little Foxes are frenziedly networking to cover their collective fat ass, disguised as the stewards of your Security, whilst caring only for their own: Faith-based Economics is headed right where it belongs ... into the dustbin of history.

Saturday, August 23, 2008

GM Drives itself off a Cliff.

naked capitalism: "Peak Oil!! Peak Inflation ?!? Peak Credit??"

Having been called a Cassandra for years now, ever since doing a survey for a statistics class at Harvard during the summer of 2002 on the Boston-area's attitude toward the coming Iraq War, I was most interested in reading the above-referenced post of someone calling themselves precisely that (ie Cassandra). After reading said article, together with the news that, as posted by Bloomberg this week,  can there be any doubt that the particularly vicious form of Vampire Capitalism advocated by the US and shoved down the throat of the ROW via the so-called "Washington Consensus" (which is little more than the "right means might" philosophy of "cower to our power") is an excellent way to enfeeble a strong economy and bring it to its knees by shoveling mountains of cash into the pockets of the rich by privatizing big government and socializing industry?

What the Bloomberg article says, is that after spending billions on lobbying that Parliament of Whores we like to call Congress, to keep the CAFE standards low for decades, we the people are now going to be required, by our "representatives", all bought and paid for by that same industry, to shell out billions more for them to do what the Free Market was incapable, apparently, of doing.

So, let's get this straight, GW, by initiating GWII (as in Gulf War II), has not only provided War profiteering to pay James Baker back for helping to put him in the Whitehouse (Bechtel is one of the largest War profiteers, as was GM's Hummer division), but, by constraining oil supplies, via its invasion of Iraq, enriched his Texan cronies (Texas being the largest supplier of Oil in the lower 48), created a patronage trough, known as the "Department of Homeland Security", to be filled with Bushies who can suck from the federal teat while lambasting "Big Government", even as, a la McCain, they funnel taxpayers' money into their own pockets, and call it Serving Their Country. It's merely a coincidence that they happen to thereby obtain higher than the private sector pay scales for their total lack of skills, along with health- care, job security, and pensions, all paid for by the citizens stuck in dead-end private industry jobs with no job security, no healthcare benefits, require skills and/or an education, which, in order to obtain, they had to first put themselves in debt for a decade, and offers only "pay for your own damn pension benefits" plans.

What this should all tell us, and tell us all, is that the particular version of Capitalism championed by the Republicans offers us Medical care and education we can't afford, pension promises, which if they're defined benefit plans, they will either be abrogated or destroyed by inflation, or, if of the 401k variety, mismanaged by professional Financial "experts", of whom, to judge by the retirement plans of the Bear Stearns employees who's savings have been wiped out (if employees of Bear Stearns...employees at the very heart of the financial industry... are incapable of managing their 401k's competently, what chance do you and I have?), will leave us destitute, and can grow the economy only by increasing the federal and state government outlays by unsustainable quantities of debt while simultaneously ballooning asset prices to ridiculous valuations, it's quite apparent that we are all a bunch of suckers who want nothing more than to have bigger and bigger houses built for us not to live in, make bigger and bigger bombs so brutally destructive that we can't use them, while manufacturing bigger and bigger cars that we can't afford to drive, all while paying more and more money for food that poisons us, hospitals that kill us and leaders that sneer at us to live within our means, while they run billion-dollar campaigns to put them in positions where they can collect millions from graft and bribery, all the while calling it by nicer names like "lobbying".

But just as "spin" has come into the vernacular, to enable us to talk openly of politicians' distortion of truth and outright lies, cynically hiring Spinmeisters, like Karl Rove, to better package those lies so they're more palatable for public consumption, allowing us to convince ourselves that a lie by any other name is not still a lie, small government has come to mean larger and larger outlays for the military and the War Machine that enables it, while running larger and larger deficits and pushing up the National debt into trillions and trillions of dollars so that when its bankrupt and unable to pay for social security they can simply shrug their shoulders and absolve themselves of any blame ... "it was the system".

On May 28, 1987, Mathias Rust took off from Helsinki, and, flying at low altitude to avoid radar detection, landed a small, single-engine plane in Moscow's Red Square.

This caused considerable embarrassment to the Politburo, and within a year the entire top echelon of the Soviet military had been replaced.

On September 11, 2001, airliner jets slammed into NYC's largest towering skyscrapers and into the Pentagon itself, killing thousands and wreaking havoc in not only those cities but to the airline industry and the economy as a whole. Not one government person lost their job. The head of the National Security council was promoted; the bloated Pentagon budget swelled to catastrophic proportions; Afghanistan, the country that we had armed and made hospitable as a haven for terrorist activity was taken over by those same organizations that had made the attacks possible, and, having set the same trap for ourselves that we had, with much braggadocio, and highly publicized with the release of "Charlie Wilson's War", laid for the former Soviet Union, sprang it on ourselves.

By doing so, a small cadre of left-over Reagan-era apparatchiks and felons, together with their new cronies, took over the reins of the federal government. Having an immensely high opinion of themselves they are not far from believing that they form a species apart from the rest of the human race, and, therefore, brook no dissent. As Alexis DE Tocqueville predicted in his magnificent volume on the United States, "Democracy in America": "they regard the ... states as (their) subjects and enforce the respect for their own sovereignty under cover of the sovereignty of The Union. Things may be done in the Federal government's name, but in truth, the Union would have ceased to exist."

Wrapping themselves in the flag so as to appear patriotic, they can then maneuver the federal government toward a policy of proclaimed national interest whereas the only interests they serve are their own. Since this is also the stance of the entire US Congress now, there's no one from either party in the legislative branch to cry foul at the Executive branch, as the cry would quickly, without falsehood, be visited upon themselves. For by proclaiming Greed, the very epitome of self-interest, to be sacrosanct, how can the same rulers declare themselves patriotic, which by definition puts the interest of the country above their own?

So the entire government becomes enmeshed in a tawdry web of deceit where, since everyone's culpable, and all that newcomers want is to enrich themselves, there's no one left to hold anyone accountable, even for such an enormous failure of all our National Institutions that the calamity of September 11 represents. Consequently, all it's been used for is a once-in-a-lifetime opportunity to expand federal spending, without even a pretense of accountability, that has brought us to the downward spiral of loss and defeat for which the US citizenry will pay while its leaders and Aristocracy continue to squander the productive capacity of a great people on realizing their own dreams of attaining Super Wealth by the continuation of the two great vehicles for absconding in the night with the products of labor: Huge budget deficits and Inflation. USA! USA! USA! ... has become a command from the rich: You essay, I'll just sit back and take the fruits of those essays (although I, naturally, won't even stoop to pick said fruit; after all, that's why we allow illegal immigration).

Wednesday, August 20, 2008

This is the Neo con-game; same as the old con-game.

Howard Kunstler, author of "The Long Emergency", in a speech in front of the Agora Financial investment symposium, was reported to have stated that: "The American suburb was the greatest misallocation of resources in the history of the world… Why? Because it has no future; because we’re not going to be able to run it…. We don’t have the resource base to run it."

This statement articulates the reason for both the enormity of the current financial crisis and the reason for its intractable nature, at least as measured by the actions the Fed has thus far taken to alleviate it. Because all the Fed has even attempted to do is to put markets back in operating condition while completely ignoring the underlying realities that engendered their dysfunctionality in the first place. The assumption with such a policy is that, once we balance the gyrating colossus, we can work on the underlying problems that are causing it to teeter so dizzyingly on the brink of collapse.

But this assumption is proving to be fatally flawed. Like the assumption that, after the U$ reached peak oil production in the early 70's, we could simply fuel the ever-thirsty behemoth of constantly-increasing U$ energy consumption with imported oil. Like the assumption that a society in which the major corporations, and the federal government collude to reassure the citizenry, via cooked up ideological Free-Market fervor, a la Milton "The Monster" Friedman, in which they pretend to believe that relieving the upper class of any responsibility for any of the rest of society, and then restructuring the tax system to flood them with money, simultaneously relieving them of their fiduciary responsibility to said system, that somehow, via "the wisdom of the marketplace" ( that's just been relieved of its "burden " of paying livable wages by colluding with a foreign Communistic Totalitarian regime to provide free labor from an impoverished, prostrate citizenry) can magically grow and prosper into a sustainable future.

But these outlandish assumptions weren’t believed by the ruling class. Unlike the rest of us, they were quite aware that peak oil production was reached in the US as far back as the early 70’s. So were the Saudis, who would have been completely incapable of an oil embargo if the production of US oil had not reached its peak, from which it would inevitably, inexorably decline. And it is from this point in time that one can easily follow the Upper Class plan to confiscate the productive capacity of the US, monetize it, and then export it to regimes in which it could constrain its costs from the clamoring of a middle class it couldn’t control, and continue to reap the profits far into the future, long after the Youessay was destroyed; their profits safe in Swiss Bank accounts and goldbricks, surveying their work in smug comfort from Swiss chalets and basking in the sun at third world resorts with the local minions to cater to their every whim.

Many consign such theses to the realm of conspiracy theories; however this plan is no conspiracy. A conspiracy, by its very definition, is secret. But the US population is so seduced by the illusive prosperity of the trinkets provided by the armed forces of the free market, enabled by its Demockracy, that they’ve failed to note that anything of real value or capable of producing real security via investment in future productivity, has been pawned or conned or cast away. So the rich are free to steal right in front of our eyes, to cavort in their splendor, pervert the justice system, undermine the constitution, plan the destruction of Social Security, disable the regulatory mechanisms of the federal government, leave the States’ Treasuries not just empty but in the red by billions, and build up their own privatized armies, using taxpayer monies (Blackwater armed forces were the first “help” the victims of Katrina saw), monopolize all organs of the media, and use public monies to privatize wealth on a breathtaking scale, all with impunity from, in fact with the blessing of, the public (barring those few “elites” who “read books” and stuff).

So this has been done, not in secret, but in public, right in front of your eyes, using keywords like “freedom”, “Democracy”, “security”, and “liberalism”, together with the same strategy used in the middle east of funding and arming religious fundamentalists to do their dirty work, the Republicans have systematically undermined the democratic voice of the population and replaced it with the intolerant hate-speech of people of “faith” who baptize themselves with the knowledge that they’re doing the work of the Supernatural when they bomb US embassies, murder abortion doctors by shooting them in the back, or bomb abortion clinics. (Once the “War on Terror” was declared by their leader in the US, their Commander in Chief, George W. Bush, the radical forces of Christian fundamentalism have been called off, and not a single outrage of this nature has occurred within the US).

Because just as both the World Wars of the 20’th century were won by the West “riding on a wave of oil”, so the prosperity following those wars was fueled by that same black gold. The major difference being that after WWI, there was no mechanism in place to wrest control of the resultant prosperity from the cold hands of the capitalists and place it under control of those whose blood was spilled and whose backs were broken to produce it. Instead, like now, it all flowed to the richest, who need it the least, but whose greed is insatiable, self-stoked, narcissistically stroked to the level of insanity, by a financial mania and Darwinian justification of their racial and intellectual superiority, even as they descended into Hobbesian tooth-and-nail economic debauchery.

So seeing their black gold running dry, and disdainfully dismissive of the consequences on the very economy that enables their ascendancy, they scramble to destroy each others' enterprises, using high-minded phrases such as “creative destruction” to justify an orgy of self-aggrandizement that would leave the very population that produces their ignoble obliquity destitute. In their back-to-the-future dream world, the subdued population resembles those in authoritarian regimes such as the Middle East and Communist China. All aspirations not consistent with the upper class mirage are crushed by “Homeland Security” forces, while only one “American Dream” is allowed. The all-too-apparent contradiction of there being but one dream for a population exceeding 300 million free people in pursuit of happiness is never questioned. Nor is the fact that in the most prosperous nation in the world, with a GDP larger than that of the next three economies in the world combined (Japan, Germany, and China), the most anyone can dream for is a place to live. That’s why homelessness in America isn’t a problem: it’s a solution.

Remember, "We don’t have the resource base to run it.", but we can generate HUGE profits building it and then tearing it down, using the taxation on the resultant profits to fund an Imperial War of aggression, which will suppress the supply of oil to the world markets, enrich our fellow Oilmen, as the inevitable squeeze in supply and stoking of demand that a War and the Marketing of Huge gas-guzzling, 3-ton, SUV’s and Hummers will engender (deficits don’t matter and conservation is for lily-livered wimps…LIES), and leaving the population in dire financial straits with no one to blame but themselves. This is the Neocon-game; same as the old con-game. Welcome to the Back-to-the-Future world.

And as we continue to relive the economic panic of 1907 in 2007 and beyond, just think, we soon get to relive WWI; 2014’s just a scant 6 years away. As they dust off the old slogans that worked so well then, and are working so well now, we can look forward to another War to end All Wars with renewed relish, because apparently that’s all we care about anymore, destroying other peoples and confiscating their resources in the name of “freedom”, so they can go to those who rightly deserve them …U$.

Suburbia's become part of California's prison system, We don’t have the resource base to run it, but if we build it, they will come. Although they can ill afford to. But such is the new science of behavioral economics, where the prisons are Home Sweet Home and are built by the very population that clamors to be let into them.

Wednesday, August 13, 2008

Who the Fed cuts cut the Deepest.

The result of the gerrymandering of the economy in order to encourage misallocation of capital on a massive scale by funneling enormous streams of revenue into assets such as exurban homes, SUV's and the equity markets, was the creation of myriad credit-induced bubbles, the bursting of which, have brought us to our current state of a collapsing financial sector, crumbling infrastructure, and bloated, and growing, Federal and State government deficits. And because these "assets" were then leveraged, via mortgage-backed securities, "collateralized" debt obligations, and the like, they all rode high on a wave of debt, i.e.liabilities, misconstrued as assets. As if loans made to people with no collateral to back them, were as good as those made to fund the building of a factory, which at least had the potential to produce future returns able to finance the payment of the interest on that debt.

So, for those consumers who took out risky loans, and speculated on the pipe-dream of ever-expanding property values, while the citizens of the country in which that property was located continued to have their livelihoods eroded by a Corporate-Government collusion to castrate the bargaining power of labor, and could buy the consumer goods brought to its shores by the productive capacity of those whose totalitarian government brooks no dissent, only by extracting the phantom profits from their property's rising price, the Fed cut of the Discount Rate was a boon...for now.

But they will soon join the rest of us, receiving paltry returns for savings, in experiencing the ultimate failure of the cut as it raises the prices of those very same imported goods, by raising the inflation rate around the globe for those consumers in other countries, where our exported inflation (which is what lowering the interest rate on the World's Reserve Currency does) has caused much more rapidly increasing prices (including for those goods they export to us). But for those who have access to capital at a cost far less than the inflation rate, i.e. the banks, whose deregulation and subsequent chicanery got us into this intractable situation in the first place, the Fed cuts are a Godsend of Corporate Welfare and Stat-ism, explicitly pandering to the needs of these well-endowed Corporate hogs.

This is important , because, even as several articles have been written about the "New Frugality", and that Frugality is the "New Cool", such frugality fights against extremely powerful headwinds, as the Federal Government continues to increase an already unpayable National debt, of which the interest alone ($250 Billion) is equal to half of the Current fiscal year's budget deficit of half a Trillion dollars. This means that no matter how thrifty one may be, the government is spending your money faster than you can save it.

Saturday, August 2, 2008

Mistaking depression for delight.

A friend recently told me in an e-mail: "I am sure u must be delighted about the economy. all of your predictions are coming to fruition."

To which I had to reply:

"Delighted? That's just plain mean. It's like saying that the voices warning about the imminence of an Al-quaeda attack on the US in 2001 were "delighted" at the destruction of those twin soulless monoliths in Manhattan.

To suggest that because I didn't join the silence of the lambs as they flocked to be fleeced by usurers and conmen, dutifully wearing flag pendants in their lapels, is a perfect example of how the repression of any opinion that doesn't conform to the official script of the Age of Reagan, AIPAC, and the PNAC is not thrust upon us, Orwellian style, by an ever-watchful Big Brother, but instead is inflicted on us by the very citizens we wish to enlighten.

The message is do not rock the boat by discussing the perfidy wrought in dark backrooms where financiers, CEO's and politicians, posing as pious Puritans, virtuously betray their country and give their whole-souled services to the ruin of their fellow men.

Because although they offer their usual assured pronouncements upon finance, banking, market trends and property values, it is spine-tinglingly apparent that below all this is just utter, naked, frantic terror - the terror of men who know that they are ruined and are afraid to admit it, even to themselves.

The broken fragments of America waits and fears and schemes to put off the day of its impending ruin ... that you should accuse me of being delighted by this devolution into the maelstrom of anarchy and fear simply because I gave voice to how alarmed I was at the enormity of the fraud that was so bold-facedly, yes even delightedly, brought upon the citizenry, abetted by their own Oedipal (as in it is self-inflicted) blindness, smacks of denunciation.

Thursday, July 31, 2008

Vampire Capitalism

I've noticed that they've used the term "moral hazard" a lot more on TV in the last 6 months than in the last 6 yrs.

Moral hazard is defined as: "The risk that a party to a transaction has not entered into the contract in good faith, has provided misleading information about its assets, liabilities, or credit capacity, or has an incentive to take unusual risks in a desperate attempt to earn a profit before the contract settles."

Sound like gobbledygook, but FDIC insurance gives the most compelling example. Since the Fed has cut its rate to 2%, elderly savers have seen their paltry incomes from their "safe" investments in CD's slashed by more than half, just as their costs have begun escalating relentlessly. What this forces them to do is seek out higher yields, but with an eye to capital preservation, as they have no way to recover from capital losses. This makes them gravitate towards those banks that offer higher paying CD's....ie, those banks that are desperate to re-capitalize because of the enormous losses they've suffered by offering ARMs to the poor, in this case, let's say Countrywide Savings, whose CD rates are in the 4.5% range.

So those banks with the worst record of skating on thin ice and proffering risky loans, with practically criminal intent on raking their customers over the coals, are the very banks that, thanks to FDIC insurance, receive the most funds flowing to them. Without insurance, no one in their right minds would put their capital into an institution on the brink of failure, with no business plan in place that differs from the one that got them in the treacherous straits they deliberately sailed into in the first place ... and for precisely the same reason: considering themselves TBTF: too big to fail. This is the tacit understanding among large financial institutions, put in place since the failure, and subsequent FED rescue, of Chicago's Continental Illinois National City bank in the 80's, that should their risky behavior bite them in the ass, the FED'll always come to their rescue.

That same model of encouraging risky behavior applies to the health industry as well. Although I'd argue it's a misnomer. Like the "Defense" Dept. As we saw at Pearl Harbor, and 9/11, the US military is uninterested in providing anything as unglamorous as defense...the real money and excitement is to be made in waging War, but then we'd have to admit what we really are, and since that's not pretty, the mightiest military machine ever to straddle the face of the earth prefers to liken itself to a helpless little lamb, always having to defend its poor picked-on little self from unwarranted attacks.

So just as the War dept likes to call itself Defense, the Illness industry likes to refer to itself as the "healthcare" industry, whereas, in a Capitalist society, health is the last thing the Illness industry is interested in, as there's absolutely no money to be made from a society in robust health. And where there's no money, there's no industry, no shareholders, no raison d'etre. The perfect example of this is of course, the so-called "HMO's", whose last interest is in maintaining its patients' health....they are only interested in collecting insurance payments from the employees' Companies, discouraging them from using their services so as to keep the expenses down, and then jettisoning any responsibility to continue coverage to people who've paid for it for 20 years w/out ever using it, (as they were in good health) when they're laid off, and finally, just when they do need those services, in retirement, casting them off to the responsibility of the government.

This is the same model as the financial industry: all the profits to the private sector, all the risk and liability thrown onto the public sector. With the very industry that profited so handsomely fighting tooth and nail to keep from paying any taxes.

And were they to act any differently, the shareholders would take their money away from them and invest it elsewhere. Because the investments were made in the first place, not to maintain health, but to profit from disease.

Why is this, in America...or more accurately, the United States (which, true to form, has usurped the name America from the continent, because, lacking any Real name, like its former counterpart, the USSR, has to call itself America, as if Mexico and Canada don't exist....if we are America, then Mexicans aren't illegal aliens, are they?, they are as American as you and me...in fact more so, as their ancestral blood is of this continent whereas yours is not), the bastion of Vampire Capitalism, Champion to the Rich and Privileged, news to anyone?

That's what's Capitalism's all about: Hobbesian, nasty, brutish, Jackboot-in-the-face, Lord of the Flies, might makes right, winner takes all and the rest be damned, survival of the fittest, kick the losers when they're down while laughing, Triumphalism. Don't you watch Fox News? Have you not listened to a word that Blonde mop-on-a-pole, Anne Colt-face says?

Which gets us back to moral hazard. That term, is, of course, basically the definition of Capitalism, where from cigarette companies to Automobile manufacturers, the aim of the Corporation is to sell its own customers products that are poisonous, dangerous, expensive and marketed deceptively to obscure the fact that all the above is true. The whole intent is to kill off its customers once they've procreated, destroying any chance of survival into old age when they're perceived as nothing but a drain on profits.

This is the model, adopted from the Military and Oil industries. The Macho Militancy on which the post-USSR world has been built: the so-called "Washington Consensus". It's Yahweh or the Highway. Without the Soviet Union to point to and say how horrible it is in comparison with our own wonderful selves, the whole pretense of cradle-to-grave socialism has been rent asunder, and capitalism's true colors made unabashedly apparent. The winners, who of course are the American Aristocracy, are allowed to, as in French pre- revolutionary days, no encouraged to, prey on their fellow citizens, who now have no rights, inalienable or otherwise, stripped to the status of denizens in their own country, their own government concerned more with factories in China, (there being no more here) and eviscerating any labor laws still extant here, and cynically giving them the finger while intoning "Let them eat ....", well, it ain't cake this time, unless it's yellow.

Because, if anything , the Privileged Class have attained a whole new level of snide viciousness, as embodied by that hellacios, supercilious, pussy-flashing skank, Paris Hilton.