http://informationclearinghouse.info/article22499.htm
From Bunker Hill to Baghdad
Pinter's Dispatch to Obama
About a month before Barack Obama announced his candidacy for the presidency of the United States, former National Security Adviser Zbigniew Brzezinski appeared on PBS's Charlie Rose Show and was asked whether he thought Obama would be a good choice for president. Brzezinski paused for a minute, peered at Rose out of the corner of his eye, and answered, "Just think of the symbolism." As soon as he said that, Brzezinski and Rose broke out into laughter as though they were sharing a private joke.
Brzezinski was right, of course. Obama was the perfect choice for president. Not because of his experience. He had none. He was a two year senator with a resume' small enough to fit on the back of a matchbox. Still Obama had what Brzezinski and Co. were looking for, symbolism; the kind of symbolism that connected him to people around the world and made them feel like one of their own had finally clawed their way to the top. Even better, Obama was a charismatic populist who could fill stadiums with adoring fans and put a benign face on America's interventions in Afghanistan and Iraq. What more could Brzezinski hope for? After 8 years of dragging "Brand America" through the mud, the country would finally get the emergency facelift it needed and begin to restore its battered image as the world's indispensable nation.
For leftists, Obama has been a total bust. He's escalated the war in Afghanistan, increased the cross-border bombings of Pakistan, hemmed and hawed about prosecuting war crimes, refused to actively lobby House members to make it easier for workers to organize (EFCA), and surrounded himself with bank industry reps who've committed $12.8 trillion to sinking financial institutions with no assurance that the money would be repaid. Apart from a trifling bill on stem cells, Obama has done absolutely zero to confirm his bone fides as a liberal. The truth is, Obama is neither liberal nor conservative; he's simply an inspiring orator and a skillful politician who has no strong convictions about anything. If he achieves greatness, it will be because he was thrust into a crisis he couldn't avoid and reluctantly acted in the best interests of the American people. That possibility still exists, although it seems more unlikely by the day.
Foreign leaders are clearly relieved to see the last of George W. Bush, and they appear to be willing to give Obama every opportunity to mend fences and break with the past. But Obama has made little effort to reciprocate or show that he's serious about real change. The emphasis seems to be more on public relations than policy; more on glitzy photo ops, grandiose speeches and gadding about from one capital to another, than ending the chronic US meddling and militarism. Where's the beef or is it all just empty posturing?
No one's ready to write-off Obama just yet, but he needs to show he's the real-deal by taking steps to ratchet-down the war machine and reign in the corporate elites and bank vermin. But is it really possible for one man--however well-meaning--to change the course of a nation by standing up the gaggle of racketeers who pull the strings from behind the curtain? Keep in mind, America's history of violent interventions, unprovoked wars, color-coded revolutions and coup d' etats has a long pedigree that stretches from Bunker Hill to Baghdad. That river of blood did not begin with George Bush and it won't end with Barack Obama. Every generation has produced its own litany of crimes, from Wounded Knee to Nagasaki to My Lai to Falluja. In Harold Pinter's Nobel acceptance speech, the playwright invokes one such incident which epitomizes the pattern of hostility which has been repeated over and over again wherever the Washington mandarins detect opposition to their iron-fisted rule.........
..........Pinter's speech is a somber indictment of US foreign policy; a policy which is now cloaked behind the rock-star facade of Barack Obama. Nothing has changed and, perhaps, nothing will change. The same barbarous campaign that thrived under Bush has been passed along to Obama intact. Wherever there is resistance to US ambitions; there lies the enemy. Whether its Marxists in Bogota, nationalists in Kosovo, Bolivarians in Caracas, Shia militias in Beirut, Islamic moderates in Mogadishu or Quakers in Toledo. They're all enemies, every one of them, and they need to be dealt with. Obama is no fool; he knows he's being used. He knows he wasn't chosen for his enlightened views on health care and stem cells. He was picked because the men in charge needed a new posterboy to hide behind while they carry out their illicit activities. Obama is not so much of a Commander in chief as he is master illusionist, diverting attention from the stealth war that goes on relentlessly with or without his consent. Here's Pinter again:
"The crimes of the United States have been systematic, constant, vicious, remorseless, but very few people have actually talked about them. You have to hand it to America. It has exercised a quite clinical manipulation of power worldwide while masquerading as a force for universal good. It's a brilliant, even witty, highly successful act of hypnosis...It's a scintillating stratagem."
Consider how the news was shaped to make it look like the invasions of Iraq and Afghanistan were carried out for altruistic reasons. Thus, the war in Afghanistan became "Operation Enduring Freedom", stressing the selfless generosity of bombing a country into oblivion and reinstating the thuggish warlords to power. The same strategy was used for the invasion of Iraq which was celebrated as "liberation from a brutal dictator." Liberation which cost the lives of over 1 million Iraqis and the displacement of 4 million more. Still, no one in the UN or so called international community has pressed for removing the US from the Security Council or prosecuting its leaders for war crimes. It's a testimony to the success of the US media in upholding the "tapestry of lies" of which Pinter speaks. Under Obama, the charade has only gotten worse. The coverage of the war has stopped entirely. War? What war? What matters now is Obama's cheery banter with Jay Leno, or Michelle's well-proportioned arms or Malia's adorable Portuguese Waterdog. America is whole again. Let the killing resume.
Pinter: "What has happened to our moral sensibility? Did we ever have any? What do these words mean? Do they refer to a term very rarely employed these days - conscience? A conscience to do not only with our own acts but to do with our shared responsibility in the acts of others?.......
Tuesday, April 28, 2009
Sunday, April 26, 2009
SC90-8 / http://www.globalresearch.ca/index.php?context=va&aid=12880
America Is in Need of a Moral Bailout
In decaying societies, politics become theater. The elite, who have hollowed out the democratic system to serve the corporate state, rule through image and presentation. They express indignation at AIG bonuses and empathy with a working class they have spent the last few decades disenfranchising, and make promises to desperate families that they know will never be fulfilled. Once the spotlights go on they read their lines with appropriate emotion. Once the lights go off, they make sure Goldman Sachs and a host of other large corporations have the hundreds of billions of dollars in losses they incurred playing casino capitalism repaid with taxpayer money.
We live in an age of moral nihilism. We have trashed our universities, turning them into vocational factories that produce corporate drones and chase after defense-related grants and funding. The humanities, the discipline that forces us to stand back and ask the broad moral questions of meaning and purpose, that challenges the validity of structures, that trains us to be self-reflective and critical of all cultural assumptions, have withered. Our press, which should promote such intellectual and moral questioning, confuses bread and circus with news and refuses to give a voice to critics who challenge not this bonus payment or that bailout but the pernicious superstructure of the corporate state itself. We kneel before a cult of the self, elaborately constructed by the architects of our consumer society, which dismisses compassion, sacrifice for the less fortunate, and honesty. The methods used to attain what we want, we are told by reality television programs, business schools and self-help gurus, are irrelevant. Success, always defined in terms of money and power, is its own justification. The capacity for manipulation is what is most highly prized. And our moral collapse is as terrifying, and as dangerous, as our economic collapse.........
.........Our elites are imploding. Their fraud and corruption are slowly being exposed as the disparity between their words and our reality becomes wider and more apparent. The rage that is bubbling up across the country will have to be countered by the elite with less subtle forms of control. But unless we grasp the "societal play of forces that operates beneath the surface of political forms" we will be cursed with a more ruthless form of corporate power, one that does away with artifice and the seduction of a consumer society and instead wields power through naked repression.
I had lunch a few days ago in Toronto with Henry Giroux, professor of English and cultural studies at McMaster University in Canada and who for many years was the Waterbury Chair Professor at Penn State. Giroux, who has been one of the most prescient and vocal critics of the corporate state and the systematic destruction of American education, was driven to the margins of academia because he kept asking the uncomfortable questions Adorno knew should be asked by university professors. He left the United States in 2004 for Canada.
"The emergence of what Eisenhower had called the military-industrial-academic complex had secured a grip on higher education that may have exceeded even what he had anticipated and most feared," Giroux, who wrote "The University in Chains: Confronting the Military-Industrial-Academic Complex," told me. "Universities, in general, especially following the events of 9/11, were under assault by Christian nationalists, reactionary neoconservatives and market fundamentalists for allegedly representing the weak link in the war on terrorism. Right-wing students were encouraged to spy on the classes of progressive professors, the corporate grip on the university was tightening as made clear not only in the emergence of business models of governance, but also in the money being pumped into research and programs that blatantly favored corporate interests. And at Penn State, where I was located at the time, the university had joined itself at the hip with corporate and military power. Put differently, corporate and Pentagon money was now funding research projects and increasingly knowledge was being militarized in the service of developing weapons of destruction, surveillance and death. Couple this assault with the fact that faculty were becoming irrelevant as an oppositional force. Many disappeared into discourses that threatened no one, some simply were too scared to raise critical issues in their classrooms for fear of being fired, and many simply no longer had the conviction to uphold the university as a democratic public sphere."
Frank Donoghue, the author of "The Last Professors: The Corporate University and the Fate of the Humanities," details how liberal arts education has been dismantled. Any form of learning that is not strictly vocational has at best been marginalized and in many schools has been abolished. Students are steered away from asking the broad, disturbing questions that challenge the assumptions of the power elite or an economic system that serves the corporate state. This has led many bright graduates into the arms of corporate entities they do not examine morally or ethically. They accept the assumptions of corporate culture because they have never been taught to think.........
...........The values that sustain an open society have been crushed. A university, as John Ralston Saul writes, now "actively seeks students who suffer from the appropriate imbalance and then sets out to exaggerate it. Imagination, creativity, moral balance, knowledge, common sense, a social view-all these things wither. Competitiveness, having an ever-ready answer, a talent for manipulating situations-all these things are encouraged to grow. As a result amorality also grows; as does extreme aggressivity when they are questioned by outsiders; as does a confusion between the nature of good versus having a ready answer to all questions. Above all, what is encouraged is the growth of an undisciplined form of self-interest, in which winning is what counts."
This moral nihilism would have terrified Adorno. He knew that radical evil was possible only with the collaboration of a timid, cowed and confused population, a system of propaganda and a press that offered little more than spectacle and entertainment and an educational system that did not transmit transcendent values or nurture the capacity for individual conscience. He feared a culture that banished the anxieties and complexities of moral choice and embraced a childish hyper-masculinity, one championed by ruthless capitalists (think of the brutal backstabbing and deception cheered by TV shows like "Survivor") and Hollywood action heroes like the governor of California.
"This educational ideal of hardness, in which many may believe without reflecting about it, is utterly wrong," Adorno wrote. "The idea that virility consists in the maximum degree of endurance long ago became a screen-image for masochism that, as psychology has demonstrated, aligns itself all too easily with sadism."
Sadism is as much a part of popular culture as it is of corporate culture. It dominates pornography, runs like an electric current through reality television and trash-talk programs and is at the core of the compliant, corporate collective. Corporatism is about crushing the capacity for moral choice. And it has its logical fruition in Abu Ghraib, the wars in Iraq and Afghanistan and our lack of compassion for the homeless, our poor, the mentally ill, the unemployed and the sick.
"The political and economic forces fuelling such crimes against humanity-whether they are unlawful wars, systemic torture, practiced indifference to chronic starvation and disease or genocidal acts-are always mediated by educational forces," Giroux said. "Resistance to such acts cannot take place without a degree of knowledge and self-reflection. We have to name these acts and transform moral outrage into concrete attempts to prevent such human violations from taking place in the first place."
The single most important quality needed to resist evil is moral autonomy. Moral autonomy, as Immanuel Kant wrote, is possible only through reflection, self-determination and the courage not to cooperate.
Moral autonomy is what the corporate state, with all its attacks on liberal institutions and "leftist" professors, has really set out to destroy. The corporate state holds up as our ideal what Adorno called "the manipulative character." The manipulative character has superb organizational skills and the inability to have authentic human experiences. He or she is an emotional cripple and driven by an overvalued realism. The manipulative character is a systems manager. He or she exclusively trained to sustain the corporate structure, which is why our elites are wasting mind-blowing amounts of our money on corporations like Goldman Sachs and AIG. "He makes a cult of action, activity, of so-called efficiency as such which reappears in the advertising image of the active person," Adorno wrote of this personality type. These manipulative characters, people like Lawrence Summers, Henry Paulson, Robert Rubin, Ben Bernanke, Timothy Geithner, AIG's Edward Liddy and Goldman Sachs CEO Lloyd Blankfein, along with most of our ruling class, have used corporate money and power to determine the narrow parameters of the debate in our classrooms, on the airwaves and in the halls of Congress while they looted the country............
In decaying societies, politics become theater. The elite, who have hollowed out the democratic system to serve the corporate state, rule through image and presentation. They express indignation at AIG bonuses and empathy with a working class they have spent the last few decades disenfranchising, and make promises to desperate families that they know will never be fulfilled. Once the spotlights go on they read their lines with appropriate emotion. Once the lights go off, they make sure Goldman Sachs and a host of other large corporations have the hundreds of billions of dollars in losses they incurred playing casino capitalism repaid with taxpayer money.
We live in an age of moral nihilism. We have trashed our universities, turning them into vocational factories that produce corporate drones and chase after defense-related grants and funding. The humanities, the discipline that forces us to stand back and ask the broad moral questions of meaning and purpose, that challenges the validity of structures, that trains us to be self-reflective and critical of all cultural assumptions, have withered. Our press, which should promote such intellectual and moral questioning, confuses bread and circus with news and refuses to give a voice to critics who challenge not this bonus payment or that bailout but the pernicious superstructure of the corporate state itself. We kneel before a cult of the self, elaborately constructed by the architects of our consumer society, which dismisses compassion, sacrifice for the less fortunate, and honesty. The methods used to attain what we want, we are told by reality television programs, business schools and self-help gurus, are irrelevant. Success, always defined in terms of money and power, is its own justification. The capacity for manipulation is what is most highly prized. And our moral collapse is as terrifying, and as dangerous, as our economic collapse.........
.........Our elites are imploding. Their fraud and corruption are slowly being exposed as the disparity between their words and our reality becomes wider and more apparent. The rage that is bubbling up across the country will have to be countered by the elite with less subtle forms of control. But unless we grasp the "societal play of forces that operates beneath the surface of political forms" we will be cursed with a more ruthless form of corporate power, one that does away with artifice and the seduction of a consumer society and instead wields power through naked repression.
I had lunch a few days ago in Toronto with Henry Giroux, professor of English and cultural studies at McMaster University in Canada and who for many years was the Waterbury Chair Professor at Penn State. Giroux, who has been one of the most prescient and vocal critics of the corporate state and the systematic destruction of American education, was driven to the margins of academia because he kept asking the uncomfortable questions Adorno knew should be asked by university professors. He left the United States in 2004 for Canada.
"The emergence of what Eisenhower had called the military-industrial-academic complex had secured a grip on higher education that may have exceeded even what he had anticipated and most feared," Giroux, who wrote "The University in Chains: Confronting the Military-Industrial-Academic Complex," told me. "Universities, in general, especially following the events of 9/11, were under assault by Christian nationalists, reactionary neoconservatives and market fundamentalists for allegedly representing the weak link in the war on terrorism. Right-wing students were encouraged to spy on the classes of progressive professors, the corporate grip on the university was tightening as made clear not only in the emergence of business models of governance, but also in the money being pumped into research and programs that blatantly favored corporate interests. And at Penn State, where I was located at the time, the university had joined itself at the hip with corporate and military power. Put differently, corporate and Pentagon money was now funding research projects and increasingly knowledge was being militarized in the service of developing weapons of destruction, surveillance and death. Couple this assault with the fact that faculty were becoming irrelevant as an oppositional force. Many disappeared into discourses that threatened no one, some simply were too scared to raise critical issues in their classrooms for fear of being fired, and many simply no longer had the conviction to uphold the university as a democratic public sphere."
Frank Donoghue, the author of "The Last Professors: The Corporate University and the Fate of the Humanities," details how liberal arts education has been dismantled. Any form of learning that is not strictly vocational has at best been marginalized and in many schools has been abolished. Students are steered away from asking the broad, disturbing questions that challenge the assumptions of the power elite or an economic system that serves the corporate state. This has led many bright graduates into the arms of corporate entities they do not examine morally or ethically. They accept the assumptions of corporate culture because they have never been taught to think.........
...........The values that sustain an open society have been crushed. A university, as John Ralston Saul writes, now "actively seeks students who suffer from the appropriate imbalance and then sets out to exaggerate it. Imagination, creativity, moral balance, knowledge, common sense, a social view-all these things wither. Competitiveness, having an ever-ready answer, a talent for manipulating situations-all these things are encouraged to grow. As a result amorality also grows; as does extreme aggressivity when they are questioned by outsiders; as does a confusion between the nature of good versus having a ready answer to all questions. Above all, what is encouraged is the growth of an undisciplined form of self-interest, in which winning is what counts."
This moral nihilism would have terrified Adorno. He knew that radical evil was possible only with the collaboration of a timid, cowed and confused population, a system of propaganda and a press that offered little more than spectacle and entertainment and an educational system that did not transmit transcendent values or nurture the capacity for individual conscience. He feared a culture that banished the anxieties and complexities of moral choice and embraced a childish hyper-masculinity, one championed by ruthless capitalists (think of the brutal backstabbing and deception cheered by TV shows like "Survivor") and Hollywood action heroes like the governor of California.
"This educational ideal of hardness, in which many may believe without reflecting about it, is utterly wrong," Adorno wrote. "The idea that virility consists in the maximum degree of endurance long ago became a screen-image for masochism that, as psychology has demonstrated, aligns itself all too easily with sadism."
Sadism is as much a part of popular culture as it is of corporate culture. It dominates pornography, runs like an electric current through reality television and trash-talk programs and is at the core of the compliant, corporate collective. Corporatism is about crushing the capacity for moral choice. And it has its logical fruition in Abu Ghraib, the wars in Iraq and Afghanistan and our lack of compassion for the homeless, our poor, the mentally ill, the unemployed and the sick.
"The political and economic forces fuelling such crimes against humanity-whether they are unlawful wars, systemic torture, practiced indifference to chronic starvation and disease or genocidal acts-are always mediated by educational forces," Giroux said. "Resistance to such acts cannot take place without a degree of knowledge and self-reflection. We have to name these acts and transform moral outrage into concrete attempts to prevent such human violations from taking place in the first place."
The single most important quality needed to resist evil is moral autonomy. Moral autonomy, as Immanuel Kant wrote, is possible only through reflection, self-determination and the courage not to cooperate.
Moral autonomy is what the corporate state, with all its attacks on liberal institutions and "leftist" professors, has really set out to destroy. The corporate state holds up as our ideal what Adorno called "the manipulative character." The manipulative character has superb organizational skills and the inability to have authentic human experiences. He or she is an emotional cripple and driven by an overvalued realism. The manipulative character is a systems manager. He or she exclusively trained to sustain the corporate structure, which is why our elites are wasting mind-blowing amounts of our money on corporations like Goldman Sachs and AIG. "He makes a cult of action, activity, of so-called efficiency as such which reappears in the advertising image of the active person," Adorno wrote of this personality type. These manipulative characters, people like Lawrence Summers, Henry Paulson, Robert Rubin, Ben Bernanke, Timothy Geithner, AIG's Edward Liddy and Goldman Sachs CEO Lloyd Blankfein, along with most of our ruling class, have used corporate money and power to determine the narrow parameters of the debate in our classrooms, on the airwaves and in the halls of Congress while they looted the country............
SC90-7 / http://jameshowardkunstler.typepad.com/clusterfuck_nation/2009/04/note-hope-truth/comments/page/4/#comments
Turner Radio Network:
http://turnerradionetwork.blogspot.com/2009/04/leaked-bank-stress-test-reults.html
The Turner Radio Network has obtained the stress test results. They are very bad. The most salient points from the stress tests appear below.
1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent. (Based upon the “alternative more adverse” scenario which had a 3.3 percent contraction of the U.S. Economy in 2009, accompanied by 8.9 percent unemployment, followed by 0.5 percent growth of the U.S. Economy but a 10.3 percent jobless in 2010.)
2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans. (Without further government injections of cash)
3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.
4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.
5) Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular - JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank - taking especially large risks.
6) Bank of America`s total credit exposure to derivatives was 179 percent of its risk-based capital; Citibank`s was 278 percent; JPMorgan Chase`s, 382 percent; and HSBC America`s, 550 percent. It gets even worse: Goldman Sachs began reporting as a commercial bank, revealing an alarming total credit exposure of 1,056 percent, or more than ten times its capital! (HSBC is NOT in the top 19 banks undergoing a stress test, but is mentioned in the report as an aside because of its risk capital exposure to derivatives)
7) Not only are there serious questions about whether or not JPMorgan Chase, Goldman Sachs,Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, can continue in business, more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts!
The debt crisis is much greater than the government has reported. The FDIC`s "Problem List" of troubled banks includes 252 institutions with assets of $159 billion. 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter.
Put bluntly, the entire US Banking System is in complete and total collapse.
Posted by: Nudge April 20, 2009 at 07:50 PM
http://turnerradionetwork.blogspot.com/2009/04/leaked-bank-stress-test-reults.html
The Turner Radio Network has obtained the stress test results. They are very bad. The most salient points from the stress tests appear below.
1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent. (Based upon the “alternative more adverse” scenario which had a 3.3 percent contraction of the U.S. Economy in 2009, accompanied by 8.9 percent unemployment, followed by 0.5 percent growth of the U.S. Economy but a 10.3 percent jobless in 2010.)
2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans. (Without further government injections of cash)
3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.
4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.
5) Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular - JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank - taking especially large risks.
6) Bank of America`s total credit exposure to derivatives was 179 percent of its risk-based capital; Citibank`s was 278 percent; JPMorgan Chase`s, 382 percent; and HSBC America`s, 550 percent. It gets even worse: Goldman Sachs began reporting as a commercial bank, revealing an alarming total credit exposure of 1,056 percent, or more than ten times its capital! (HSBC is NOT in the top 19 banks undergoing a stress test, but is mentioned in the report as an aside because of its risk capital exposure to derivatives)
7) Not only are there serious questions about whether or not JPMorgan Chase, Goldman Sachs,Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, can continue in business, more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts!
The debt crisis is much greater than the government has reported. The FDIC`s "Problem List" of troubled banks includes 252 institutions with assets of $159 billion. 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter.
Put bluntly, the entire US Banking System is in complete and total collapse.
Posted by: Nudge April 20, 2009 at 07:50 PM
Friday, April 24, 2009
SC90-6 / http://www.globalresearch.ca/index.php?context=va&aid=13283
Housing Bubble Smackdown: Bigger Crash AheadHuge "shadow inventory"
Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing prices is gaining speed. The moratorium was initiated in January to give Obama's anti-foreclosure program---which is a combination of mortgage modifications and refinancing---a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes, but it's clear now that the program will fall well-short of its objective.
In March, housing prices accelerated on the downside indicating bigger adjustments dead-ahead. Trend-lines are steeper now than ever before--nearly perpendicular. Housing prices are not falling, they're crashing and crashing hard. Now that the foreclosure moratorium has ended, Notices of Default (NOD) have spiked to an all-time high. These Notices will turn into foreclosures in 4 to 5 months time creating another cascade of foreclosures. Market analysts predict there will be 5 MILLION MORE FORECLOSURES BETWEEN NOW AND 2011. It's a disaster bigger than Katrina. Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. 40 percent of delinquent homeowners have already vacated their homes. There's nothing Obama can do to make them stay. Worse still, only 30 percent of foreclosures have been relisted for sale suggesting more hanky-panky at the banks. Where have the houses gone? Have they simply vanished?
600,000 "DISAPPEARED HOMES?"
Here's a excerpt from the SF Gate explaining the mystery:
"Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.
"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."
In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory." ("Banks aren't Selling Many Foreclosed Homes" SF Gate)
If regulators were deployed to the banks that are keeping foreclosed homes off the market, they would probably find that the banks are actually servicing the mortgages on a monthly basis to conceal the extent of their losses. They'd also find that the banks are trying to keep housing prices artificially high to avoid heftier losses that would put them out of business. One thing is certain, 600,000 "disappeared" homes means that housing prices have a lot farther to fall and that an even larger segment of the banking system is underwater.
Here is more on the story from Mr. Mortgage "California Foreclosures About to Soar...Again"
"Are you ready to see the future? Ten’s of thousands of foreclosures are only 1-5 months away from hitting that will take total foreclosure counts back to all-time highs. This will flood an already beaten-bloody real estate market with even more supply just in time for the Spring/Summer home selling season...Foreclosure start (NOD) and Trustee Sale (NTS) notices are going out at levels not seen since mid 2008. Once an NTS goes out, the property is taken to the courthouse and auctioned within 21-45 days....The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium."
JP Morgan Chase, Wells Fargo and Fannie Mae have all stepped up their foreclosure activity in recent weeks. Delinquencies have skyrocketed foreshadowing more price-slashing into the foreseeable future. According to the Wall Street Journal:
"Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can't meet their loan payments, up from about 1.7 million in 2008." (Ruth Simon, "The housing crisis is about to take center stage once again" Wall Street Journal)
Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners. That means smaller retirement savings, less discretionary spending, and lower living standards. The next leg down in housing will be excruciating; every sector will feel the pain. Obama's $75 billion mortgage rescue plan is a mere pittance; it won't reduce the principle on mortgages and it won't stop the bleeding. Policymakers have decided they've done enough and are refusing to help. They don't see the tsunami looming in front of them plain as day. The housing market is going under and it's going to drag a good part of the broader economy along with it. Stocks, too.
Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing prices is gaining speed. The moratorium was initiated in January to give Obama's anti-foreclosure program---which is a combination of mortgage modifications and refinancing---a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes, but it's clear now that the program will fall well-short of its objective.
In March, housing prices accelerated on the downside indicating bigger adjustments dead-ahead. Trend-lines are steeper now than ever before--nearly perpendicular. Housing prices are not falling, they're crashing and crashing hard. Now that the foreclosure moratorium has ended, Notices of Default (NOD) have spiked to an all-time high. These Notices will turn into foreclosures in 4 to 5 months time creating another cascade of foreclosures. Market analysts predict there will be 5 MILLION MORE FORECLOSURES BETWEEN NOW AND 2011. It's a disaster bigger than Katrina. Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. 40 percent of delinquent homeowners have already vacated their homes. There's nothing Obama can do to make them stay. Worse still, only 30 percent of foreclosures have been relisted for sale suggesting more hanky-panky at the banks. Where have the houses gone? Have they simply vanished?
600,000 "DISAPPEARED HOMES?"
Here's a excerpt from the SF Gate explaining the mystery:
"Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.
"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."
In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory." ("Banks aren't Selling Many Foreclosed Homes" SF Gate)
If regulators were deployed to the banks that are keeping foreclosed homes off the market, they would probably find that the banks are actually servicing the mortgages on a monthly basis to conceal the extent of their losses. They'd also find that the banks are trying to keep housing prices artificially high to avoid heftier losses that would put them out of business. One thing is certain, 600,000 "disappeared" homes means that housing prices have a lot farther to fall and that an even larger segment of the banking system is underwater.
Here is more on the story from Mr. Mortgage "California Foreclosures About to Soar...Again"
"Are you ready to see the future? Ten’s of thousands of foreclosures are only 1-5 months away from hitting that will take total foreclosure counts back to all-time highs. This will flood an already beaten-bloody real estate market with even more supply just in time for the Spring/Summer home selling season...Foreclosure start (NOD) and Trustee Sale (NTS) notices are going out at levels not seen since mid 2008. Once an NTS goes out, the property is taken to the courthouse and auctioned within 21-45 days....The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium."
JP Morgan Chase, Wells Fargo and Fannie Mae have all stepped up their foreclosure activity in recent weeks. Delinquencies have skyrocketed foreshadowing more price-slashing into the foreseeable future. According to the Wall Street Journal:
"Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can't meet their loan payments, up from about 1.7 million in 2008." (Ruth Simon, "The housing crisis is about to take center stage once again" Wall Street Journal)
Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners. That means smaller retirement savings, less discretionary spending, and lower living standards. The next leg down in housing will be excruciating; every sector will feel the pain. Obama's $75 billion mortgage rescue plan is a mere pittance; it won't reduce the principle on mortgages and it won't stop the bleeding. Policymakers have decided they've done enough and are refusing to help. They don't see the tsunami looming in front of them plain as day. The housing market is going under and it's going to drag a good part of the broader economy along with it. Stocks, too.
SC90-5 / http://www.globalresearch.ca/index.php?context=va&aid=13286
Predators Starve as Humans Plunder Oceans
Harvard biologist E.O. Wilson described the human race as, “The most devastating meteorite to hit the planet.”
Humanity’s arrogance cannot be quenched.
In a compelling story written by UK’s, The Independent, Geoffrey Leans said, “Marine giants go hungry as fleets scoop up their prey for our fish suppers. April 19, 2009.http://www.independent.co.uk/environment/nature/predators-starve-as-we-plunder-oceans-1671066.html
For the past 20 years, as reported by Look Magazine in 1991 and Mother Jones News in 2008, human beings kill 100 million sharks every year, primarily for their fins, and toss their lingering carcasses back into the oceans. Humans slaughter millions of seals, whales, dolphins and other mammals in drift nets cut away from ships to continue killing on the ocean floor.
But now, according to Leans, “Starving sea life – from whales to puffins, tuna to seals – is being found all over the world's oceans, as the food on which it depends is being fished out, startling new evidence shows. And much of the depletion, ironically, is caused by raising captive fish – for the table.
“New figures from the Food and Agriculture Organization show that the small fish on which birds and marine mammals feed have become the main target of fishing fleets since stocks of bigger fish have become exhausted. Four times as much of these "prey fish" are now brought to shore as half a century ago, and seven of the world's largest 10 fisheries now go after them.”
Not mentioned in the report, humans dump billions of plastic containers into the oceans. One thousand miles off San Francisco, a three million ton floating patch of plastic, called, “The Great Pacific Garbage Patch” swirls around in an area twice the size of Texas. Those containers, including, Styrofoam, stick in the stomachs of birds, whales, turtles, dolphins and other marine life—to kill by the millions. The problem remains: the death of those marine animals assures that the plastics will be recycled for more death and destruction of life in endless cycles.
“More than four-fifths of this catch does not go directly to feed people, but is ground up into fish oil and fish meal and increasingly used to raise carnivorous species such as salmon in fish farms,” Leans said. “A captive fish needs up to one pound of food to put on a single pound in weight. And, as a result, there is less and less left for its natural predators.”
"We have caught most of the big fish and are now going after their food," says Margot Stiles, a marine scientist for Oceana, the leading international sea protection pressure group.”
Additionally, sea life suffers from toxic dead zones at the mouths of major rivers from India, U.S., China, Brazil, Peru, Argentina and Europe. Humanity spits its thousands of chemicals into those rivers in the form of insecticides, herbicides, pesticides and fertilizers. Those dead zones range from 10,000 square miles at the mouth of the Mississippi to 27,000 square miles in the North Sea. Very few vertebrates can live in those toxic waters. Our oceans have become the final toilet for human waste.
“A new report by the group, Hungry Oceans, describes how "scrawny predators – dolphins, sea bass and even whales – have turned up on coastlines all over the world,” adding that scientists are finding them and seabirds "emaciated from lack of food, vulnerable to disease and without enough energy to reproduce,” said Leans.
Not mentioned in the report, humans discard billions upon billions of pieces of glass, metal, chemical and plastic waste that rolls around the ocean floor like a child’s messy playroom. In this case, it destroys habitat for all marine creatures.
With another added three billion humans in the next 41 years, does any marine life or land life on earth stand a chance of surviving the 21st century?
Harvard biologist E.O. Wilson described the human race as, “The most devastating meteorite to hit the planet.”
Humanity’s arrogance cannot be quenched.
In a compelling story written by UK’s, The Independent, Geoffrey Leans said, “Marine giants go hungry as fleets scoop up their prey for our fish suppers. April 19, 2009.http://www.independent.co.uk/environment/nature/predators-starve-as-we-plunder-oceans-1671066.html
For the past 20 years, as reported by Look Magazine in 1991 and Mother Jones News in 2008, human beings kill 100 million sharks every year, primarily for their fins, and toss their lingering carcasses back into the oceans. Humans slaughter millions of seals, whales, dolphins and other mammals in drift nets cut away from ships to continue killing on the ocean floor.
But now, according to Leans, “Starving sea life – from whales to puffins, tuna to seals – is being found all over the world's oceans, as the food on which it depends is being fished out, startling new evidence shows. And much of the depletion, ironically, is caused by raising captive fish – for the table.
“New figures from the Food and Agriculture Organization show that the small fish on which birds and marine mammals feed have become the main target of fishing fleets since stocks of bigger fish have become exhausted. Four times as much of these "prey fish" are now brought to shore as half a century ago, and seven of the world's largest 10 fisheries now go after them.”
Not mentioned in the report, humans dump billions of plastic containers into the oceans. One thousand miles off San Francisco, a three million ton floating patch of plastic, called, “The Great Pacific Garbage Patch” swirls around in an area twice the size of Texas. Those containers, including, Styrofoam, stick in the stomachs of birds, whales, turtles, dolphins and other marine life—to kill by the millions. The problem remains: the death of those marine animals assures that the plastics will be recycled for more death and destruction of life in endless cycles.
“More than four-fifths of this catch does not go directly to feed people, but is ground up into fish oil and fish meal and increasingly used to raise carnivorous species such as salmon in fish farms,” Leans said. “A captive fish needs up to one pound of food to put on a single pound in weight. And, as a result, there is less and less left for its natural predators.”
"We have caught most of the big fish and are now going after their food," says Margot Stiles, a marine scientist for Oceana, the leading international sea protection pressure group.”
Additionally, sea life suffers from toxic dead zones at the mouths of major rivers from India, U.S., China, Brazil, Peru, Argentina and Europe. Humanity spits its thousands of chemicals into those rivers in the form of insecticides, herbicides, pesticides and fertilizers. Those dead zones range from 10,000 square miles at the mouth of the Mississippi to 27,000 square miles in the North Sea. Very few vertebrates can live in those toxic waters. Our oceans have become the final toilet for human waste.
“A new report by the group, Hungry Oceans, describes how "scrawny predators – dolphins, sea bass and even whales – have turned up on coastlines all over the world,” adding that scientists are finding them and seabirds "emaciated from lack of food, vulnerable to disease and without enough energy to reproduce,” said Leans.
Not mentioned in the report, humans discard billions upon billions of pieces of glass, metal, chemical and plastic waste that rolls around the ocean floor like a child’s messy playroom. In this case, it destroys habitat for all marine creatures.
With another added three billion humans in the next 41 years, does any marine life or land life on earth stand a chance of surviving the 21st century?
SC90-4 / http://www.ricefarmer.blogspot.com/
Growth and DebtIn a interview, Colin Campbell says in part,
These new energy sources, especially oil, the easiest, allowed the rapid expansion of industry, transport, trade and agriculture allowing the economy to expand greatly. It was accompanied by the growth of financial capital as banks lent more than they had on deposit, confident that Tomorrow's Expansion was collateral for Today's Debt.I don’t know if Campbell made up that italicized bit himself, but it’s a great line that we should all remember because it distills the essence of our oil-driven growth economy into a short, pithy sentence: “Tomorrow’s expansion is collateral for today’s debt.” In other words, the only way that most of the colossal debt out there could ever be repaid is for the world economy to quickly recover and grow at a respectable clip. And in fact, as the above verbal distillation says, that is indeed the whole premise for our debt-based world economic system.
The world financial crisis is said to have been precipitated when a whole lot of bad debt (subprime loans, etc.) started to unwind. And of course there has been much unregulated greed out there creating that toxic waste. But what led to this in the first place was the expectation that continuing economic growth would somehow keep the show going.
Now, however, there’s a really big possibility that we have passed the peak of oil production. Making this especially likely is the shelving of many oilfield development projects because they are unprofitable at current low crude prices. Even if there is an economic recovery, there would almost certainly not be enough oil to power it.
If this really is the “end of growth,” then there is a heckuva lot more bad debt in the world than we can imagine, because the collateral for all of that debt is disappearing or already gone.
These new energy sources, especially oil, the easiest, allowed the rapid expansion of industry, transport, trade and agriculture allowing the economy to expand greatly. It was accompanied by the growth of financial capital as banks lent more than they had on deposit, confident that Tomorrow's Expansion was collateral for Today's Debt.I don’t know if Campbell made up that italicized bit himself, but it’s a great line that we should all remember because it distills the essence of our oil-driven growth economy into a short, pithy sentence: “Tomorrow’s expansion is collateral for today’s debt.” In other words, the only way that most of the colossal debt out there could ever be repaid is for the world economy to quickly recover and grow at a respectable clip. And in fact, as the above verbal distillation says, that is indeed the whole premise for our debt-based world economic system.
The world financial crisis is said to have been precipitated when a whole lot of bad debt (subprime loans, etc.) started to unwind. And of course there has been much unregulated greed out there creating that toxic waste. But what led to this in the first place was the expectation that continuing economic growth would somehow keep the show going.
Now, however, there’s a really big possibility that we have passed the peak of oil production. Making this especially likely is the shelving of many oilfield development projects because they are unprofitable at current low crude prices. Even if there is an economic recovery, there would almost certainly not be enough oil to power it.
If this really is the “end of growth,” then there is a heckuva lot more bad debt in the world than we can imagine, because the collateral for all of that debt is disappearing or already gone.
SC90-3 / http://www.globalresearch.ca/index.php?context=va&aid=13241
Economy in Jeopardy. Barack Obama: "Financial Crime Boss"
Since taking office, Obama, wittingly or otherwise, has headed the largest criminal enterprise in history - the mass looting of national wealth to enrich his Wall Street benefactors. He assembled a rogue economic team of Clinton/Robert Rubin retreads - to fix the current crisis they engineered.
In a March 13 article, (author and former Republican strategist) Kevin Phillips called them "recycled senior (Clinton administration) Democrats (responsible for the) tech mania, deregulation binge and (1997 - 2000) stock market bubble and crash. (Obama) extend(ed) the (disastrous) mismanagement and pro-Wall Street bias of the 2008 Bush regime bailout."
He called Geithner and Bernanke "hapless," the result of their ruinous misjudgments (and, along with Alan Greenspan, complicit) with finance-sector malfeasance."
He said Summers will be "remembered for helping to block federal regulation of financial derivatives and orchestrat(ing) the 1999" Glass-Steagall repeal, among his other "achievements." He went down the list of key economic officials and trashed them all as the very types to be avoided, not appointed.
He noted that Bernanke was chairman of George Bush's Council of Economic Advisers and added: "Imagine if FDR had retained Herbert Hoover's chief economic advisor and loyal Republican Fed Chairman in 1933....To think that the pussycat Fed (would become) a saber-toothed tiger is a deception." Worse still, ruinous economic policies "could prove fatal" if White House policies favor "Wall Street but not the national economy or American people" - the very direction they've now taken.
In a follow-up April 7 article, Phillips highlighted "The Disaster Stage of US Financialization....a much grander-scale disaster than anything that happened in 1929 - 1933. Worse, it dwarfs the abuses of debt, finance and financialization that brought down previous leading world economic powers like Britain and Holland."
Today's crisis represents "the bursting of the huge 25-year, almost $50 trillion debt bubble that helped underwrite the hijacking of the US economy by a rabid financial sector...." It's realigning global power with America losing its economic leadership won in WW II.
"The ignominy deserved by Wall Street after 1929-1933 is peanuts compared with the opprobrium the US financial sector and its political and regulatory allies deserve this time." Financialized America radically transformed the country, now "doubly staggering because of the crushing burden of its collapse."
Yet major media pundits and reporters barely noticed and now claim relief is just a few quarters away - ignoring a metastasizing cancer, a national disaster, while policy makers heap fuel on a raging blaze now consuming us, yet too little public rage confronts them.
A Former Insider Speaks Out
Economics Professor William Black is a former senior bank regulator and Savings and Loan prosecutor, currently teaching economics and law at the University of Missouri. In an April 13 Barrons interview, he referred to "failed bankers (advising) failed regulators on how to deal with failed assets" they all had a hand in creating and proliferating.
His conclusion: "How can it result in anything but failure." He called the scale of financial fraud "immense," and said "Unless the current administration changes course pretty drastically, the scandal will destroy Barack Obama's presidency," besides what it's doing to the country, global economies, and many millions of people here and abroad.
He scathed Summers and Geithner, both "important architects of (today's) problems," and the latter as a failed and dishonest regulator, yet "numbering himself among those who convey tough medicine when he's really pandering to the interests of a select group of banks." No need to mention which ones.
The law mandates corrective action, the kind FDR took in the 1930s. He, Bernanke and Summers flout the law, "in naked violation, in order to pursue the kind of favoritism that the law was designed to prevent." They've turned taxpayers into "suckers" who'll pay dearly for decades, maybe generations.
His refusal to put insolvent banks into receivership, resorting to deceptive language like "legacy assets," and pursuing the worst of Chicago School economics "is positively Orwellian....If cheaters prosper, (they'll) dominate. It's like Gresham's law: Bad money drives out the good. Well, bad behavior" does the same thing "without good enforcement."
His bailout plans are disastrous. They prop up zombie banks by "mispricing toxic assets....The last thing we need is a further drain on our resources....by promoting this toxic asset market (and notions of) too-big-to-fail."
With most, perhaps all, the big banks insolvent (a polite term for bankrupt), what's going on is "a multi-trillion dollar cover-up by publicly traded (enterprises), which amounts to felony securities fraud on a massive scale."
Ultimately, these firms will be forced into receivership, their "managements and boards stripped of office, title, and compensation." What's needed is a 1930s-style Pecora investigation to get to the bottom of their fraud, deceit, and cover-up, along with government complicity to hide it. More on that below.
Black cited billions to AIG as the single worst abuse so far - to bail out their counterparties like Switzerland's UBS at the same time we were prosecuting it for tax fraud. As bad was following Goldman Sachs' advice to direct a $13 billion counterparty windfall to itself.
The whole process reeks of corruption. It must be stopped, and a new direction instituted under a reformist economic team - one that will admit the nature and depth of the problem, cut the tie to Wall Street, and take corrective action the law mandates. That's "precisely what isn't happening."
Washington is "wedded to the bad idea of bigness" and power of Wall Street. In today's America, financialization is predominant. It's a cancer eating away at the fabric of the nation and many millions affected, the result of the grandest of grand thefts.
A good start would be to break up the financial giants into more effectively managed and less powerful units - maybe the way Standard Oil was dismantled through a simple share spinoff. In addition, "a new seriousness must be put into regulation," and a new resolve to enforce it.
Today, the whole system encourages fraud, one based on results at any cost, so "fudging the numbers" becomes de rigueur and global bigness the holy grail. It sends the wrong message - play or pay with your job and future on Wall Street. "The basis for all regulation and white-collar crime is to take the competitive advantage away from the cheats, so the good guys can prevail. We need to get back to that." It's been decades since we've been there and high time we took it seriously. Job one is a thorough housecleaning and new direction, much like what's described below.
On April 3, Black appeared on Bill Moyers Journal on PBS and explained what's briefly enumerated below. From his experience as a regulator and prosecutor, he said:
-- fraud is initiated in boardrooms and CEO offices by making "really bad loans, because they pay better;"
-- then grow them like a Ponzi scheme multiplied through leverage; it's hugely profitable early on, then inevitably creates "disaster down the road;"
-- dismantling regulation makes it possible;
-- one scheme was subprime, Alt-A , and even prime "liars' loans" - meaning no checks are made on income, jobs, ability to repay, and the more they're inflated the more profitable they are; the amount of them was enormous - for one company alone, they generated as many losses as the entire S & L scandal;
-- toxic products were willfully created to scam borrowers for big profits;
-- rating agencies went along by appraising junk as AAA instead of doing it honestly;
-- in September 2004, the FBI warned about a mortgage fraud epidemic, but nothing was done to stop it; so now we have a crisis hundreds of times greater than the S & L one and bad policy in play to address it;
-- as in Barrons, he accused top Bush and Obama officials of a cover-up - to conceal the insolvency of all major banks and by so doing broke the law established after the S & L crisis, the Prompt Corrective Action Law that mandates insolvent banks be shut down and/or placed in receivership; and
-- this is the greatest financial scandal in history - swept under the rug by top government officials of both parties; it's legally and morally indefensible, and it's wrecking the country.
In an April 6 article, Black calls ongoing "stress tests a complete sham....to fool people....make us chumps" and essentially say 'If we lie and they believe us, all will be well" when, in fact, it's not. It's part of the giant cover-up and greatest ever criminal fraud - by bankers and complicit government officials.
On April 13, Nouriel Roubini shared Black's view. He cited the stress test "spin machine" leaking stories to the press that all 19 banks in question will pass. None will fail. If more "exceptional assistance" is needed, Washington will provide it.
However, Q 1 macro data tells another story as growth, unemployment, and falling home prices alone "are worse than those in FDIC's baseline scenario for 2009 AND even worse than those for the more adverse stressed scenario for 2009. Thus, the stress test results are meaningless" as worsening data are outdistancing "the worst case scenario."
In other words, test results "are not worth the paper (they'll be) written on" as their assumptions are fraudulently based. They're "fudge tests....blatantly rigged" to put a brave face on a very bleak economic picture.
They're in addition to other changes, including the recent Financial Accounting Standards Board (FAS ruling. It's responsible for developing "generally accepted accounting principles" known as GAAP. On April 3, it changed so-called "mark-to-market" standards to "mark-to-make believe" ones. It also voted to allow banks to book smaller impaired asset losses to paint a brighter profits picture. It let Wells Fargo, for example, claim a Q 1 profit when it's drowning in losses, ones it can hide and not take.
Also likely coming is restoration of the "uptick rule" that prohibited short-selling in a down market. Established in 1938 to prevent disorderly selling, it allows shorts only when shares trade up. In June 2007, it was removed. Re-introductory proposals are now being considered to artificially boost prices.
Roubini calls it "a form of legalized manipulation of the stock market by regulators....to prevent short-sellers (from doing) their job, i.e. make stock prices reflect fundamentals and prevent bubbles."
Overall, alarm bells should be warning about reckless monetary and fiscal policies, but perverse market reaction was relief that's wildly premature according to some like Roubini. Others see a protracted downturn, a prolonged winter, and if conditions deteriorate enough perhaps a nuclear one, unlike anything before seen, and why not:
-- world economies are plummeting at depression-level speed by all key measures - production, consumption, trade, profits, asset values, capital flows, and more;
-- unemployment is soaring; in America close to 20% with all excluded and understated categories included;
-- pensions have been lost along with benefits;
-- homelessness is rising sharply, the result of over six million foreclosures; tent cities are appearing across the country;
-- recent data shows soaring foreclosures up 24% in Q 1 2009; in March alone, 46% higher than a year earlier - alone providing clear evidence of serious trouble; and
-- desperation is fueling anger and despair as conditions keep deteriorating absent sound policies to address them........
...........Financial expert and investor safety advocate Martin Weiss is most critical of all. He calls bank stress tests "FLIM-FLAM" in accusing Washington of hiding the true condition of the nation's 19 largest banks.
Key economic indicators like GDP contraction and unemployment are far worse than stress test parameters. "Our own government is clearly cooking the books - using (false) criteria to deceive you; hoping you'll trust banks that are clearly hanging by a thread."
On May 4, they'll announce the results - jerry-rigged to present an illusion of solvency, but clearly a deceptive lie. The economy is sinking, not stabilizing, let alone recovering. The administration is bailing out bankers while wrecking the economy and millions of households. Why isn't Washington addressing the tough questions, he asks. Because the answers have them "terrified," so they play for time while home foreclosures are exploding, factories are sitting idle, consumption keeps falling, yet they hope conditions will improve.
No one asks:
-- what if states and cities can't provide vital services;
-- hospitals have to close down "due to disruptions in insurance payments;"
-- "supermarket shelves are emptied because trucking companies can't get short-term loans to stay in business;"
-- utilities "are crippled as the crisis kills the revenues they count on from corporations;" and
-- "soaring deficits drive interest rates sky-high and gut the dollar, driving the cost of living through the roof."
What if one day we discover America is no longer America. What if we realize that day is today.
Another Day, Another Scheme
The latest one lets ordinary people participate in Geithner's Public-Private Partnership Program (PPIP) that sounds suspiciously like "liars' loan" fraud, except this time "investments" in worthless junk are involved that will separate fools from their money.
The New York Times headlined the plan by comparing it to WW I Liberty Bonds that helped the country win the war. Now it's "to come to the aid of their banks - with the added inducement of possibly making some money...." The idea is for "large investment companies to create the financial-crisis equivalent of war bonds: bailout funds" to sucker the unwary to "invest" and, simultaneously, quiet opposition to the handouts.
According to money management firm BlackRock director Steven Baffico: "It's giving the guy on Main Street an equal seat at the table next to the big guys." Pimco's Bill Gross called it a "win-win-win policy." Absolutely for him so he loves it.
Plans are still being discussed. They won't likely be announced for several months, but already the scheme is apparent. It's to offload toxic junk on the public, let unwary investors take losses, relieve troubled banks of more of them, and arrange for investment fund issuers (like Pimco and BlackRock) to reap healthy fees if enough suckers can be enlisted to go along.
As troublesome is FDIC's role in the scam - through its transformation from insuring depositors to a much greater one guaranteeing over $1 trillion in junk assets, way over its charter $30 billion limit by twisting the rules to arrange it.
Its charter allows extraordinary steps to be taken when an "emergency determination by secretary of the Treasury" is made to mitigate "systemic risk." However, its Section 14 Borrowing Authority states:
"The Corporation is authorized to borrow from the Treasury....for insurance purposes (not speculation, bailouts, or other schemes, an amount) not exceeding in the aggregate $30,000,000,000 outstanding at any one time....Any such loan shall be used by the Corporation solely in carrying out its functions with respect to such insurance (of bank deposits, then up to $5000, now temporarily at $250,000)...."
"Before issuing an obligation or making a guarantee, the Corporation shall estimate the cost of such obligations (as well as market value)....the Corporation may not issue or incur any obligation, if, after (so doing) the aggregate amount of obligations of the Deposit Insurance Fund (exceeds) the total of the amounts authorized ($30 billion under) section 14(a)."
PPIP violates FDIC rules. If it's opened to the public, greater fraud will result with ordinary people hit hardest as usual, the best reason to avoid this and alert others to be as prudent. It's another dubious scheme to separate the unwary from their money and redirect it to the top - to the same fraudsters responsible for the crisis and their investment company partners going along with the scam.
The Treasury extended the deadline for PPIP participants (to April 24) and loosened some of its guidelines - suggesting that investor support has been less than expected.
However, on April 2, the Financial Times (FT) headlined: "Bailed-out banks eye toxic asset buys." Giants like JP Morgan Chase, Citigroup, Bank of America, and Goldman Sachs "are considering buying (each other's) toxic assets," and why not when it's a win-win way to offload each other's junk, do it at inflated prices, and stick taxpayers with the risk. New York University's Stern School of Business Professor Lawrence White put it this way:
"I'm worried about the following scenario: You and I have troubled assets, I buy assets from you, you buy them them from me, and at the end of the day it (looks) suspiciously like you bought assets from yourself" with Treasury funds.
PPIP prohibits banks from buying their own assets but lets them do it from other firms, either directly or through investment funds set up for that purpose, and according to Treasury: "It's an open program designed to get markets going."
On April 3, Reuters reported that "US regulators may be open to letting TARP recipients participate in the new program," and already Goldman Sachs and Morgan Stanley suggested they'll do it. Others expressed interest in what some observers call a giant money laundering scheme compounding the colossal flimflam that in the end most likely won't work - except to extract multi-trillions from the public to banksters with Washington acting complicitly as transfer agent.
Meanwhile economic fundamentals are deteriorating at depression-level speed and depth while Obama remains in denial. On April 2 at the G 20, he cited "a very productive summit that will be, I believe, a turning point in our pursuit of global economic recovery" when, in fact, it produced nothing beyond the usual hype - plus this time the quadrupling of the IMF's budget to inflict debt bondage on its willing partakers.
We're clearly in early stage unchartered waters of what Michel Chossudovsky calls "The Great Depression of the 21st Century" heading America for "fiscal collapse" because of policies amounting to "the most drastic curtailment in public spending in American history" - directing most of it for militarism and foreign wars, Wall Street bailouts, and half a trillion for public debt service.
In an April 12 commentary, longtime, well-respected Chicago financial journalist Terry Savage headlined "Social Security Myth" in reporting on some of the fallout. Someone has to pay for "fixes" and militarism, that someone is us, and target one is Social Security. According to Savage:
"Most likely, Social Security will become a "needs-based" payout to low income, elderly recipients - not a return of the 'investments' you made with all those FICA deductions from your pay check every month over your working career." In other words, Washington intends to renege on the 74-year old promise FDR announced to the nation on August 14, 1935:
"Today a hope of many years' standing is in large part fulfilled....This social security measure gives at least some protection to thirty millions of our citizens (now over 56 million, including Supplement Security Income recipients) who will reap direct benefits....This law represents a cornerstone in a structure....by no means complete. (It) will take care of human needs and at the same time provide the United States an economic structure of vastly greater soundness. (The passage of this bill marks) a historic (achievement) for all time."
It's now in jeopardy, so here's what Savage advises. Prepare. "Save more money, (and) start from an honest assessment" of what's coming. What FDR gave will be taken away. "And that's The Savage Truth." A disturbing and outrageous one as well as all the other ways we've been betrayed.
Since taking office, Obama, wittingly or otherwise, has headed the largest criminal enterprise in history - the mass looting of national wealth to enrich his Wall Street benefactors. He assembled a rogue economic team of Clinton/Robert Rubin retreads - to fix the current crisis they engineered.
In a March 13 article, (author and former Republican strategist) Kevin Phillips called them "recycled senior (Clinton administration) Democrats (responsible for the) tech mania, deregulation binge and (1997 - 2000) stock market bubble and crash. (Obama) extend(ed) the (disastrous) mismanagement and pro-Wall Street bias of the 2008 Bush regime bailout."
He called Geithner and Bernanke "hapless," the result of their ruinous misjudgments (and, along with Alan Greenspan, complicit) with finance-sector malfeasance."
He said Summers will be "remembered for helping to block federal regulation of financial derivatives and orchestrat(ing) the 1999" Glass-Steagall repeal, among his other "achievements." He went down the list of key economic officials and trashed them all as the very types to be avoided, not appointed.
He noted that Bernanke was chairman of George Bush's Council of Economic Advisers and added: "Imagine if FDR had retained Herbert Hoover's chief economic advisor and loyal Republican Fed Chairman in 1933....To think that the pussycat Fed (would become) a saber-toothed tiger is a deception." Worse still, ruinous economic policies "could prove fatal" if White House policies favor "Wall Street but not the national economy or American people" - the very direction they've now taken.
In a follow-up April 7 article, Phillips highlighted "The Disaster Stage of US Financialization....a much grander-scale disaster than anything that happened in 1929 - 1933. Worse, it dwarfs the abuses of debt, finance and financialization that brought down previous leading world economic powers like Britain and Holland."
Today's crisis represents "the bursting of the huge 25-year, almost $50 trillion debt bubble that helped underwrite the hijacking of the US economy by a rabid financial sector...." It's realigning global power with America losing its economic leadership won in WW II.
"The ignominy deserved by Wall Street after 1929-1933 is peanuts compared with the opprobrium the US financial sector and its political and regulatory allies deserve this time." Financialized America radically transformed the country, now "doubly staggering because of the crushing burden of its collapse."
Yet major media pundits and reporters barely noticed and now claim relief is just a few quarters away - ignoring a metastasizing cancer, a national disaster, while policy makers heap fuel on a raging blaze now consuming us, yet too little public rage confronts them.
A Former Insider Speaks Out
Economics Professor William Black is a former senior bank regulator and Savings and Loan prosecutor, currently teaching economics and law at the University of Missouri. In an April 13 Barrons interview, he referred to "failed bankers (advising) failed regulators on how to deal with failed assets" they all had a hand in creating and proliferating.
His conclusion: "How can it result in anything but failure." He called the scale of financial fraud "immense," and said "Unless the current administration changes course pretty drastically, the scandal will destroy Barack Obama's presidency," besides what it's doing to the country, global economies, and many millions of people here and abroad.
He scathed Summers and Geithner, both "important architects of (today's) problems," and the latter as a failed and dishonest regulator, yet "numbering himself among those who convey tough medicine when he's really pandering to the interests of a select group of banks." No need to mention which ones.
The law mandates corrective action, the kind FDR took in the 1930s. He, Bernanke and Summers flout the law, "in naked violation, in order to pursue the kind of favoritism that the law was designed to prevent." They've turned taxpayers into "suckers" who'll pay dearly for decades, maybe generations.
His refusal to put insolvent banks into receivership, resorting to deceptive language like "legacy assets," and pursuing the worst of Chicago School economics "is positively Orwellian....If cheaters prosper, (they'll) dominate. It's like Gresham's law: Bad money drives out the good. Well, bad behavior" does the same thing "without good enforcement."
His bailout plans are disastrous. They prop up zombie banks by "mispricing toxic assets....The last thing we need is a further drain on our resources....by promoting this toxic asset market (and notions of) too-big-to-fail."
With most, perhaps all, the big banks insolvent (a polite term for bankrupt), what's going on is "a multi-trillion dollar cover-up by publicly traded (enterprises), which amounts to felony securities fraud on a massive scale."
Ultimately, these firms will be forced into receivership, their "managements and boards stripped of office, title, and compensation." What's needed is a 1930s-style Pecora investigation to get to the bottom of their fraud, deceit, and cover-up, along with government complicity to hide it. More on that below.
Black cited billions to AIG as the single worst abuse so far - to bail out their counterparties like Switzerland's UBS at the same time we were prosecuting it for tax fraud. As bad was following Goldman Sachs' advice to direct a $13 billion counterparty windfall to itself.
The whole process reeks of corruption. It must be stopped, and a new direction instituted under a reformist economic team - one that will admit the nature and depth of the problem, cut the tie to Wall Street, and take corrective action the law mandates. That's "precisely what isn't happening."
Washington is "wedded to the bad idea of bigness" and power of Wall Street. In today's America, financialization is predominant. It's a cancer eating away at the fabric of the nation and many millions affected, the result of the grandest of grand thefts.
A good start would be to break up the financial giants into more effectively managed and less powerful units - maybe the way Standard Oil was dismantled through a simple share spinoff. In addition, "a new seriousness must be put into regulation," and a new resolve to enforce it.
Today, the whole system encourages fraud, one based on results at any cost, so "fudging the numbers" becomes de rigueur and global bigness the holy grail. It sends the wrong message - play or pay with your job and future on Wall Street. "The basis for all regulation and white-collar crime is to take the competitive advantage away from the cheats, so the good guys can prevail. We need to get back to that." It's been decades since we've been there and high time we took it seriously. Job one is a thorough housecleaning and new direction, much like what's described below.
On April 3, Black appeared on Bill Moyers Journal on PBS and explained what's briefly enumerated below. From his experience as a regulator and prosecutor, he said:
-- fraud is initiated in boardrooms and CEO offices by making "really bad loans, because they pay better;"
-- then grow them like a Ponzi scheme multiplied through leverage; it's hugely profitable early on, then inevitably creates "disaster down the road;"
-- dismantling regulation makes it possible;
-- one scheme was subprime, Alt-A , and even prime "liars' loans" - meaning no checks are made on income, jobs, ability to repay, and the more they're inflated the more profitable they are; the amount of them was enormous - for one company alone, they generated as many losses as the entire S & L scandal;
-- toxic products were willfully created to scam borrowers for big profits;
-- rating agencies went along by appraising junk as AAA instead of doing it honestly;
-- in September 2004, the FBI warned about a mortgage fraud epidemic, but nothing was done to stop it; so now we have a crisis hundreds of times greater than the S & L one and bad policy in play to address it;
-- as in Barrons, he accused top Bush and Obama officials of a cover-up - to conceal the insolvency of all major banks and by so doing broke the law established after the S & L crisis, the Prompt Corrective Action Law that mandates insolvent banks be shut down and/or placed in receivership; and
-- this is the greatest financial scandal in history - swept under the rug by top government officials of both parties; it's legally and morally indefensible, and it's wrecking the country.
In an April 6 article, Black calls ongoing "stress tests a complete sham....to fool people....make us chumps" and essentially say 'If we lie and they believe us, all will be well" when, in fact, it's not. It's part of the giant cover-up and greatest ever criminal fraud - by bankers and complicit government officials.
On April 13, Nouriel Roubini shared Black's view. He cited the stress test "spin machine" leaking stories to the press that all 19 banks in question will pass. None will fail. If more "exceptional assistance" is needed, Washington will provide it.
However, Q 1 macro data tells another story as growth, unemployment, and falling home prices alone "are worse than those in FDIC's baseline scenario for 2009 AND even worse than those for the more adverse stressed scenario for 2009. Thus, the stress test results are meaningless" as worsening data are outdistancing "the worst case scenario."
In other words, test results "are not worth the paper (they'll be) written on" as their assumptions are fraudulently based. They're "fudge tests....blatantly rigged" to put a brave face on a very bleak economic picture.
They're in addition to other changes, including the recent Financial Accounting Standards Board (FAS ruling. It's responsible for developing "generally accepted accounting principles" known as GAAP. On April 3, it changed so-called "mark-to-market" standards to "mark-to-make believe" ones. It also voted to allow banks to book smaller impaired asset losses to paint a brighter profits picture. It let Wells Fargo, for example, claim a Q 1 profit when it's drowning in losses, ones it can hide and not take.
Also likely coming is restoration of the "uptick rule" that prohibited short-selling in a down market. Established in 1938 to prevent disorderly selling, it allows shorts only when shares trade up. In June 2007, it was removed. Re-introductory proposals are now being considered to artificially boost prices.
Roubini calls it "a form of legalized manipulation of the stock market by regulators....to prevent short-sellers (from doing) their job, i.e. make stock prices reflect fundamentals and prevent bubbles."
Overall, alarm bells should be warning about reckless monetary and fiscal policies, but perverse market reaction was relief that's wildly premature according to some like Roubini. Others see a protracted downturn, a prolonged winter, and if conditions deteriorate enough perhaps a nuclear one, unlike anything before seen, and why not:
-- world economies are plummeting at depression-level speed by all key measures - production, consumption, trade, profits, asset values, capital flows, and more;
-- unemployment is soaring; in America close to 20% with all excluded and understated categories included;
-- pensions have been lost along with benefits;
-- homelessness is rising sharply, the result of over six million foreclosures; tent cities are appearing across the country;
-- recent data shows soaring foreclosures up 24% in Q 1 2009; in March alone, 46% higher than a year earlier - alone providing clear evidence of serious trouble; and
-- desperation is fueling anger and despair as conditions keep deteriorating absent sound policies to address them........
...........Financial expert and investor safety advocate Martin Weiss is most critical of all. He calls bank stress tests "FLIM-FLAM" in accusing Washington of hiding the true condition of the nation's 19 largest banks.
Key economic indicators like GDP contraction and unemployment are far worse than stress test parameters. "Our own government is clearly cooking the books - using (false) criteria to deceive you; hoping you'll trust banks that are clearly hanging by a thread."
On May 4, they'll announce the results - jerry-rigged to present an illusion of solvency, but clearly a deceptive lie. The economy is sinking, not stabilizing, let alone recovering. The administration is bailing out bankers while wrecking the economy and millions of households. Why isn't Washington addressing the tough questions, he asks. Because the answers have them "terrified," so they play for time while home foreclosures are exploding, factories are sitting idle, consumption keeps falling, yet they hope conditions will improve.
No one asks:
-- what if states and cities can't provide vital services;
-- hospitals have to close down "due to disruptions in insurance payments;"
-- "supermarket shelves are emptied because trucking companies can't get short-term loans to stay in business;"
-- utilities "are crippled as the crisis kills the revenues they count on from corporations;" and
-- "soaring deficits drive interest rates sky-high and gut the dollar, driving the cost of living through the roof."
What if one day we discover America is no longer America. What if we realize that day is today.
Another Day, Another Scheme
The latest one lets ordinary people participate in Geithner's Public-Private Partnership Program (PPIP) that sounds suspiciously like "liars' loan" fraud, except this time "investments" in worthless junk are involved that will separate fools from their money.
The New York Times headlined the plan by comparing it to WW I Liberty Bonds that helped the country win the war. Now it's "to come to the aid of their banks - with the added inducement of possibly making some money...." The idea is for "large investment companies to create the financial-crisis equivalent of war bonds: bailout funds" to sucker the unwary to "invest" and, simultaneously, quiet opposition to the handouts.
According to money management firm BlackRock director Steven Baffico: "It's giving the guy on Main Street an equal seat at the table next to the big guys." Pimco's Bill Gross called it a "win-win-win policy." Absolutely for him so he loves it.
Plans are still being discussed. They won't likely be announced for several months, but already the scheme is apparent. It's to offload toxic junk on the public, let unwary investors take losses, relieve troubled banks of more of them, and arrange for investment fund issuers (like Pimco and BlackRock) to reap healthy fees if enough suckers can be enlisted to go along.
As troublesome is FDIC's role in the scam - through its transformation from insuring depositors to a much greater one guaranteeing over $1 trillion in junk assets, way over its charter $30 billion limit by twisting the rules to arrange it.
Its charter allows extraordinary steps to be taken when an "emergency determination by secretary of the Treasury" is made to mitigate "systemic risk." However, its Section 14 Borrowing Authority states:
"The Corporation is authorized to borrow from the Treasury....for insurance purposes (not speculation, bailouts, or other schemes, an amount) not exceeding in the aggregate $30,000,000,000 outstanding at any one time....Any such loan shall be used by the Corporation solely in carrying out its functions with respect to such insurance (of bank deposits, then up to $5000, now temporarily at $250,000)...."
"Before issuing an obligation or making a guarantee, the Corporation shall estimate the cost of such obligations (as well as market value)....the Corporation may not issue or incur any obligation, if, after (so doing) the aggregate amount of obligations of the Deposit Insurance Fund (exceeds) the total of the amounts authorized ($30 billion under) section 14(a)."
PPIP violates FDIC rules. If it's opened to the public, greater fraud will result with ordinary people hit hardest as usual, the best reason to avoid this and alert others to be as prudent. It's another dubious scheme to separate the unwary from their money and redirect it to the top - to the same fraudsters responsible for the crisis and their investment company partners going along with the scam.
The Treasury extended the deadline for PPIP participants (to April 24) and loosened some of its guidelines - suggesting that investor support has been less than expected.
However, on April 2, the Financial Times (FT) headlined: "Bailed-out banks eye toxic asset buys." Giants like JP Morgan Chase, Citigroup, Bank of America, and Goldman Sachs "are considering buying (each other's) toxic assets," and why not when it's a win-win way to offload each other's junk, do it at inflated prices, and stick taxpayers with the risk. New York University's Stern School of Business Professor Lawrence White put it this way:
"I'm worried about the following scenario: You and I have troubled assets, I buy assets from you, you buy them them from me, and at the end of the day it (looks) suspiciously like you bought assets from yourself" with Treasury funds.
PPIP prohibits banks from buying their own assets but lets them do it from other firms, either directly or through investment funds set up for that purpose, and according to Treasury: "It's an open program designed to get markets going."
On April 3, Reuters reported that "US regulators may be open to letting TARP recipients participate in the new program," and already Goldman Sachs and Morgan Stanley suggested they'll do it. Others expressed interest in what some observers call a giant money laundering scheme compounding the colossal flimflam that in the end most likely won't work - except to extract multi-trillions from the public to banksters with Washington acting complicitly as transfer agent.
Meanwhile economic fundamentals are deteriorating at depression-level speed and depth while Obama remains in denial. On April 2 at the G 20, he cited "a very productive summit that will be, I believe, a turning point in our pursuit of global economic recovery" when, in fact, it produced nothing beyond the usual hype - plus this time the quadrupling of the IMF's budget to inflict debt bondage on its willing partakers.
We're clearly in early stage unchartered waters of what Michel Chossudovsky calls "The Great Depression of the 21st Century" heading America for "fiscal collapse" because of policies amounting to "the most drastic curtailment in public spending in American history" - directing most of it for militarism and foreign wars, Wall Street bailouts, and half a trillion for public debt service.
In an April 12 commentary, longtime, well-respected Chicago financial journalist Terry Savage headlined "Social Security Myth" in reporting on some of the fallout. Someone has to pay for "fixes" and militarism, that someone is us, and target one is Social Security. According to Savage:
"Most likely, Social Security will become a "needs-based" payout to low income, elderly recipients - not a return of the 'investments' you made with all those FICA deductions from your pay check every month over your working career." In other words, Washington intends to renege on the 74-year old promise FDR announced to the nation on August 14, 1935:
"Today a hope of many years' standing is in large part fulfilled....This social security measure gives at least some protection to thirty millions of our citizens (now over 56 million, including Supplement Security Income recipients) who will reap direct benefits....This law represents a cornerstone in a structure....by no means complete. (It) will take care of human needs and at the same time provide the United States an economic structure of vastly greater soundness. (The passage of this bill marks) a historic (achievement) for all time."
It's now in jeopardy, so here's what Savage advises. Prepare. "Save more money, (and) start from an honest assessment" of what's coming. What FDR gave will be taken away. "And that's The Savage Truth." A disturbing and outrageous one as well as all the other ways we've been betrayed.
SC90-2 / http://jameshowardkunstler.typepad.com/clusterfuck_nation/
Note: Hope = Truth
People of good intentions and progressive predilection are scratching their heads wondering just how President Barack Obama managed to turn himself into George W. Bush Lite with sugar-on-top just twelve weeks after that fateful walk down the US Capitol's east stairway to the waiting helicopter. I'm hardly the first observer to note that Mr. Obama's actions in the face of an epochal finance fiasco and economic collapse are a mere extension of the pre-January-20 policies, carried out by much the same cast of characters.The assumption up until now was something about the reassuring value of continuity -- if we could just prop up an ailing set of banks for a little while, the US public could resume a revolving credit way-of-life within an economy dedicated to building more suburban houses and selling all the needed accessories from supersized "family" cars to cappuccino machines. This would keep everyone employed at the jobs they were qualified for -- finish carpenters, realtors, pool installers, mortgage brokers, advertising account executives, Williams-Sonoma product demonstrators, showroom sales agents, doctors of liposuction, and so on.This was a dumb strategy for such a supposedly bright group of people surrounding Mr. Obama. That old economy was dead on arrival January 20th. Even the kindest physicians don't put corpses on life support. This particular corpse has been placed in the world's cushiest intensive care unit, with transfusions running about a trillion dollars a month -- not to mention hefty bonuses for the attending nurses. Instead, a fast and furious wake might have been held, with the corpse of the old economy laid out on a granite countertop for all to toast and bid farewell. President Obama might have led this exercise with some aplomb -- even while directing his new justice department warriors to round up a host of suspects in the old economy's suspicious death.What it comes down to, apparently, is a leadership elite across all sectors -- politics, business, academia, media -- that is incapable of processing the truth, and then conveying it to the broad American public. Alas, this also appears to be a common theme in history, with a commonly tragic outcome, which is that elites get ruthlessly dumped and replaced by new elites, often composed of zealots, maniacs, nincompoops, and others generally ill-disposed to the able management of complex affairs. It's called the "circulation of elites," and in times of crisis it tends to take on a kind of downward spiraling flavor, with each gang of discredited leaders tossed out for a progressively worse one until a kind of exhaustion is reached -- whereupon the archetypal man-on-a-white-horse arrives on the scene.Mr. Obama looked to be the man-on-a-white-horse -- on the exhaustion of Reagan-Bush Jesus-Republicanism -- but he's coming off more like Philippe Égalité (Louis Philippe Joseph d'Orléans, duc d'Orléans) in 1793, with perhaps Newt Gingrich waiting offstage to become Robespierre in 2012 -- and some obscure US Army captain now toiling in Kirkuk slated to become the American Napoleon of 2015. As you've surely heard a thousand times now, history doesn't repeat itself but it rhymes. The enormities of Wall Street today are a little like those of the French Ancien Régime at Versailles. If America encounters the sort of disruptions of food and energy supplies that are brewing on the horizon, and unemployment keeps arcing up its current trajectory, civil uproars could easily follow. Readers think I joke about the Hamptons going up in flames. But the antics of the bankers, hedge funders, the CEOs, the Madoffs, and even the P. Diddy's of our time, are liable to attract murderous attention as the public mood moves from sour to wrathful.So, what people of good intention and progressive predilection want to know is how come Mr. Obama doesn't just lay out the truth, undertake the hard job of cutting the nation's losses, and get on with setting this society on a new course. The truth is that we're comprehensively bankrupt, and no amount of shuffling certificates around will avail to alter that. The bad debt has to be "worked out" -- i.e. written off, subjected to liquidation of remaining assets and collateral, reorganized under the bankruptcy statutes, and put behind us. We have to work very hard to reconfigure the physical arrangement of life in the USA, moving away from the losses of our suburbs, reactivating our towns, downscaling our biggest cities, re-scaling our farms and food production, switching out our Happy Motoring system for public transit and walkable neighborhoods, rebuilding local networks of commerce, and figuring out a way to make a few things of value again.What's happened instead is what I most feared: that our politicians would mount a massive campaign to sustain the unsustainable. That's what all the TARP and TARF and PPIT and bailouts are about. It will all amount to an exercise in futility and could easily end up wrecking the USA in every sense of the term. If Mr. Obama doesn't get with a better program, then we are going to face a Long Emergency as grueling as the French Revolution. One very plain and straightforward example at hand is the announcement last week of a plan to build a high speed rail network. To be blunt about it, this is perfectly fucking stupid. It will require a whole new track network, because high speed trains can't run on the old rights of way with their less forgiving curve ratios and grades. We would be so much better off simply fixing up and reactivating the normal-speed track system that is sitting out there rusting in the rain -- and save our more grandiose visions for a later time.I don't like to be misunderstood. With the airlines in a business death spiral, and mass motoring doomed, we need a national passenger rail system desperately. But we already have one that used to be the envy of the world before we abandoned it. And we don't have either the time or the resources to build a new parallel network.But grandiosity is just another way that we lie to ourselves about where we're at and what is really possible...........
People of good intentions and progressive predilection are scratching their heads wondering just how President Barack Obama managed to turn himself into George W. Bush Lite with sugar-on-top just twelve weeks after that fateful walk down the US Capitol's east stairway to the waiting helicopter. I'm hardly the first observer to note that Mr. Obama's actions in the face of an epochal finance fiasco and economic collapse are a mere extension of the pre-January-20 policies, carried out by much the same cast of characters.The assumption up until now was something about the reassuring value of continuity -- if we could just prop up an ailing set of banks for a little while, the US public could resume a revolving credit way-of-life within an economy dedicated to building more suburban houses and selling all the needed accessories from supersized "family" cars to cappuccino machines. This would keep everyone employed at the jobs they were qualified for -- finish carpenters, realtors, pool installers, mortgage brokers, advertising account executives, Williams-Sonoma product demonstrators, showroom sales agents, doctors of liposuction, and so on.This was a dumb strategy for such a supposedly bright group of people surrounding Mr. Obama. That old economy was dead on arrival January 20th. Even the kindest physicians don't put corpses on life support. This particular corpse has been placed in the world's cushiest intensive care unit, with transfusions running about a trillion dollars a month -- not to mention hefty bonuses for the attending nurses. Instead, a fast and furious wake might have been held, with the corpse of the old economy laid out on a granite countertop for all to toast and bid farewell. President Obama might have led this exercise with some aplomb -- even while directing his new justice department warriors to round up a host of suspects in the old economy's suspicious death.What it comes down to, apparently, is a leadership elite across all sectors -- politics, business, academia, media -- that is incapable of processing the truth, and then conveying it to the broad American public. Alas, this also appears to be a common theme in history, with a commonly tragic outcome, which is that elites get ruthlessly dumped and replaced by new elites, often composed of zealots, maniacs, nincompoops, and others generally ill-disposed to the able management of complex affairs. It's called the "circulation of elites," and in times of crisis it tends to take on a kind of downward spiraling flavor, with each gang of discredited leaders tossed out for a progressively worse one until a kind of exhaustion is reached -- whereupon the archetypal man-on-a-white-horse arrives on the scene.Mr. Obama looked to be the man-on-a-white-horse -- on the exhaustion of Reagan-Bush Jesus-Republicanism -- but he's coming off more like Philippe Égalité (Louis Philippe Joseph d'Orléans, duc d'Orléans) in 1793, with perhaps Newt Gingrich waiting offstage to become Robespierre in 2012 -- and some obscure US Army captain now toiling in Kirkuk slated to become the American Napoleon of 2015. As you've surely heard a thousand times now, history doesn't repeat itself but it rhymes. The enormities of Wall Street today are a little like those of the French Ancien Régime at Versailles. If America encounters the sort of disruptions of food and energy supplies that are brewing on the horizon, and unemployment keeps arcing up its current trajectory, civil uproars could easily follow. Readers think I joke about the Hamptons going up in flames. But the antics of the bankers, hedge funders, the CEOs, the Madoffs, and even the P. Diddy's of our time, are liable to attract murderous attention as the public mood moves from sour to wrathful.So, what people of good intention and progressive predilection want to know is how come Mr. Obama doesn't just lay out the truth, undertake the hard job of cutting the nation's losses, and get on with setting this society on a new course. The truth is that we're comprehensively bankrupt, and no amount of shuffling certificates around will avail to alter that. The bad debt has to be "worked out" -- i.e. written off, subjected to liquidation of remaining assets and collateral, reorganized under the bankruptcy statutes, and put behind us. We have to work very hard to reconfigure the physical arrangement of life in the USA, moving away from the losses of our suburbs, reactivating our towns, downscaling our biggest cities, re-scaling our farms and food production, switching out our Happy Motoring system for public transit and walkable neighborhoods, rebuilding local networks of commerce, and figuring out a way to make a few things of value again.What's happened instead is what I most feared: that our politicians would mount a massive campaign to sustain the unsustainable. That's what all the TARP and TARF and PPIT and bailouts are about. It will all amount to an exercise in futility and could easily end up wrecking the USA in every sense of the term. If Mr. Obama doesn't get with a better program, then we are going to face a Long Emergency as grueling as the French Revolution. One very plain and straightforward example at hand is the announcement last week of a plan to build a high speed rail network. To be blunt about it, this is perfectly fucking stupid. It will require a whole new track network, because high speed trains can't run on the old rights of way with their less forgiving curve ratios and grades. We would be so much better off simply fixing up and reactivating the normal-speed track system that is sitting out there rusting in the rain -- and save our more grandiose visions for a later time.I don't like to be misunderstood. With the airlines in a business death spiral, and mass motoring doomed, we need a national passenger rail system desperately. But we already have one that used to be the envy of the world before we abandoned it. And we don't have either the time or the resources to build a new parallel network.But grandiosity is just another way that we lie to ourselves about where we're at and what is really possible...........
SC90-1 / http://www.globalresearch.ca/index.php?context=va&aid=13239
The Tower of Basel: Secretive Plans for the Issuing of a Global Currency
Do we really want the Bank for International Settlements (BIS) issuing our global currency
In an April 7 article in The London Telegraph titled “The G20 Moves the World a Step Closer toa Global Currency,” Ambrose Evans-Pritchard wrote:
“A single clause in Point 19 of the communiqué issued by the G20 leaders amounts to revolution in the global financial order.
“‘We have agreed to support a general SDR allocation which will inject $250bn (£170bn) into the world economy and increase global liquidity,’ it said. SDRs are Special Drawing Rights, a synthetic paper currency issued by the International Monetary Fund that has lain dormant for half a century.
“In effect, the G20 leaders have activated the IMF’s power to create money and begin global ‘quantitative easing’. In doing so, they are putting a de facto world currency into play. It is outside the control of any sovereign body.........
........“The world is a step closer to a global currency, backed by a global central bank, running monetary policy for all humanity.” Which naturally raises the question, who or what will serve as this global central bank, cloaked with the power to issue the global currency and police monetary policy for all humanity? When the world’s central bankers met in Washington last September, they discussed what body might be in a position to serve in that awesome and fearful role. A former governor of the Bank of England stated:
“[T]he answer might already be staring us in the face, in the form of the Bank for International Settlements (BIS). . . . The IMF tends to couch its warnings about economic problems in very diplomatic language, but the BIS is more independent and much better placed to deal with this if it is given the power to do so.”1
And if the vision of a global currency outside government control does not set off conspiracy theorists, putting the BIS in charge of it surely will. The BIS has been scandal-ridden ever since it was branded with pro-Nazi leanings in the 1930s. Founded in Basel, Switzerland, in 1930, the BIS has been called “the most exclusive, secretive, and powerful supranational club in the world.” Charles Higham wrote in his book Trading with the Enemy that by the late 1930s, the BIS had assumed an openly pro-Nazi bias, a theme that was expanded on in a BBC Timewatch film titled “Banking with Hitler” broadcast in 1998.2 In 1944, the American government backed a resolution at the Bretton-Woods Conference calling for the liquidation of the BIS, following Czech accusations that it was laundering gold stolen by the Nazis from occupied Europe; but the central bankers succeeded in quietly snuffing out the American resolution.
Quigley wrote of this international banking network:
“[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.”
The key to their success, said Quigley, was that the international bankers would control and manipulate the money system of a nation while letting it appear to be controlled by the government. The statement echoed one made in the eighteenth century by the patriarch of what would become the most powerful banking dynasty in the world. Mayer Amschel Bauer Rothschild famously said in 1791:
“Allow me to issue and control a nation’s currency, and I care not who makes its laws.”
Mayer’s five sons were sent to the major capitals of Europe – London, Paris, Vienna, Berlin and Naples – with the mission of establishing a banking system that would be outside government control. The economic and political systems of nations would be controlled not by citizens but by bankers, for the benefit of bankers. Eventually, a privately-owned “central bank” was established in nearly every country; and this central banking system has now gained control over the economies of the world. Central banks have the authority to print money in their respective countries, and it is from these banks that governments must borrow money to pay their debts and fund their operations. The result is a global economy in which not only industry but government itself runs on “credit” (or debt) created by a banking monopoly headed by a network of private central banks; and at the top of this network is the BIS, the “central bank of central banks” in Basel.
Behind the Curtain
For many years the BIS kept a very low profile, operating behind the scenes in an abandoned hotel. It was here that decisions were reached to devalue or defend currencies, fix the price of gold, regulate offshore banking, and raise or lower short-term interest rates. In 1977, however, the BIS gave up its anonymity in exchange for more efficient headquarters. The new building has been described as “an eighteen story-high circular skyscraper that rises above the medieval city like some misplaced nuclear reactor.” It quickly became known as the “Tower of Basel.” Today the BIS has governmental immunity, pays no taxes, and has its own private police force.4 It is, as Mayer Rothschild envisioned, above the law.
The BIS is now composed of 55 member nations, but the club that meets regularly in Basel is a much smaller group; and even within it, there is a hierarchy. In a 1983 article in Harper’s Magazine called “Ruling the World of Money,” Edward Jay Epstein wrote that where the real business gets done is in “a sort of inner club made up of the half dozen or so powerful central bankers who find themselves more or less in the same monetary boat” – those from Germany, the United States, Switzerland, Italy, Japan and England. Epstein said:
“The prime value, which also seems to demarcate the inner club from the rest of the BIS members, is the firm belief that central banks should act independently of their home governments. . . . A second and closely related belief of the inner club is that politicians should not be trusted to decide the fate of the international monetary system.”.........
........In a May 2002 article in The Asia Times titled “Global Economy: The BIS vs. National Banks,” economist Henry C K Liu observed that the Basel Accords have forced national banking systems “to march to the same tune, designed to serve the needs of highly sophisticated global financial markets, regardless of the developmental needs of their national economies.” He wrote:
“[N]ational banking systems are suddenly thrown into the rigid arms of the Basel Capital Accord sponsored by the Bank of International Settlement (BIS), or to face the penalty of usurious risk premium in securing international interbank loans. . . . National policies suddenly are subjected to profit incentives of private financial institutions, all members of a hierarchical system controlled and directed from the money center banks in New York. The result is to force national banking systems to privatize . . . .
“BIS regulations serve only the single purpose of strengthening the international private banking system, even at the peril of national economies. . . . The IMF and the international banks regulated by the BIS are a team: the international banks lend recklessly to borrowers in emerging economies to create a foreign currency debt crisis, the IMF arrives as a carrier of monetary virus in the name of sound monetary policy, then the international banks come as vulture investors in the name of financial rescue to acquire national banks deemed capital inadequate and insolvent by the BIS.”
Ironically, noted Liu, developing countries with their own natural resources did not actually need the foreign investment that trapped them in debt to outsiders:
“Applying the State Theory of Money [which assumes that a sovereign nation has the power to issue its own money], any government can fund with its own currency all its domestic developmental needs to maintain full employment without inflation.”
When governments fall into the trap of accepting loans in foreign currencies, however, they become “debtor nations” subject to IMF and BIS regulation. They are forced to divert their production to exports, just to earn the foreign currency necessary to pay the interest on their loans. National banks deemed “capital inadequate” have to deal with strictures comparable to the “conditionalities” imposed by the IMF on debtor nations: “escalating capital requirement, loan writeoffs and liquidation, and restructuring through selloffs, layoffs, downsizing, cost-cutting and freeze on capital spending.” Liu wrote:
“Reversing the logic that a sound banking system should lead to full employment and developmental growth, BIS regulations demand high unemployment and developmental degradation in national economies as the fair price for a sound global private banking system.”
The Last Domino to Fall
While banks in developing nations were being penalized for falling short of the BIS capital requirements, large international banks managed to escape the rules, although they actually carried enormous risk because of their derivative exposure. The mega-banks succeeded in avoiding the Basel rules by separating the “risk” of default out from the loans and selling it off to investors, using a form of derivative known as “credit default swaps.”
However, it was not in the game plan that U.S. banks should escape the BIS net. When they managed to sidestep the first Basel Accord, a second set of rules was imposed known as Basel II. The new rules were established in 2004, but they were not levied on U.S. banks until November 2007, the month after the Dow passed 14,000 to reach its all-time high. It has been all downhill from there. Basel II had the same effect on U.S. banks that Basel I had on Japanese banks: they have been struggling ever since to survive.8
Basel II requires banks to adjust the value of their marketable securities to the “market price” of the security, a rule called “mark to market.”9 The rule has theoretical merit, but the problem is timing: it was imposed ex post facto, after the banks already had the hard-to-market assets on their books. Lenders that had been considered sufficiently well capitalized to make new loans suddenly found they were insolvent. At least, they would have been insolvent if they had tried to sell their assets, an assumption required by the new rule. Financial analyst John Berlau complained:
“The crisis is often called a ‘market failure,’ and the term ‘mark-to-market’ seems to reinforce that. But the mark-to-market rules are profoundly anti-market and hinder the free-market function of price discovery. . . . In this case, the accounting rules fail to allow the market players to hold on to an asset if they don’t like what the market is currently fetching, an important market action that affects price discovery in areas from agriculture to antiques.”10
Imposing the mark-to-market rule on U.S. banks caused an instant credit freeze, which proceeded to take down the economies not only of the U.S. but of countries worldwide. In early April 2009, the mark-to-market rule was finally softened by the U.S. Financial Accounting Standards Board (FAS; but critics said the modification did not go far enough, and it was done in response to pressure from politicians and bankers, not out of any fundamental change of heart or policies by the BIS........
.........Why did the BIS not retract or at least modify Basel II after seeing the devastation it had caused? Why did it sit idly by as the global economy came crashing down? Was the goal to create so much economic havoc that the world would rush with relief into the waiting arms of the BIS with its privately-created global currency?
Do we really want the Bank for International Settlements (BIS) issuing our global currency
In an April 7 article in The London Telegraph titled “The G20 Moves the World a Step Closer toa Global Currency,” Ambrose Evans-Pritchard wrote:
“A single clause in Point 19 of the communiqué issued by the G20 leaders amounts to revolution in the global financial order.
“‘We have agreed to support a general SDR allocation which will inject $250bn (£170bn) into the world economy and increase global liquidity,’ it said. SDRs are Special Drawing Rights, a synthetic paper currency issued by the International Monetary Fund that has lain dormant for half a century.
“In effect, the G20 leaders have activated the IMF’s power to create money and begin global ‘quantitative easing’. In doing so, they are putting a de facto world currency into play. It is outside the control of any sovereign body.........
........“The world is a step closer to a global currency, backed by a global central bank, running monetary policy for all humanity.” Which naturally raises the question, who or what will serve as this global central bank, cloaked with the power to issue the global currency and police monetary policy for all humanity? When the world’s central bankers met in Washington last September, they discussed what body might be in a position to serve in that awesome and fearful role. A former governor of the Bank of England stated:
“[T]he answer might already be staring us in the face, in the form of the Bank for International Settlements (BIS). . . . The IMF tends to couch its warnings about economic problems in very diplomatic language, but the BIS is more independent and much better placed to deal with this if it is given the power to do so.”1
And if the vision of a global currency outside government control does not set off conspiracy theorists, putting the BIS in charge of it surely will. The BIS has been scandal-ridden ever since it was branded with pro-Nazi leanings in the 1930s. Founded in Basel, Switzerland, in 1930, the BIS has been called “the most exclusive, secretive, and powerful supranational club in the world.” Charles Higham wrote in his book Trading with the Enemy that by the late 1930s, the BIS had assumed an openly pro-Nazi bias, a theme that was expanded on in a BBC Timewatch film titled “Banking with Hitler” broadcast in 1998.2 In 1944, the American government backed a resolution at the Bretton-Woods Conference calling for the liquidation of the BIS, following Czech accusations that it was laundering gold stolen by the Nazis from occupied Europe; but the central bankers succeeded in quietly snuffing out the American resolution.
Quigley wrote of this international banking network:
“[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.”
The key to their success, said Quigley, was that the international bankers would control and manipulate the money system of a nation while letting it appear to be controlled by the government. The statement echoed one made in the eighteenth century by the patriarch of what would become the most powerful banking dynasty in the world. Mayer Amschel Bauer Rothschild famously said in 1791:
“Allow me to issue and control a nation’s currency, and I care not who makes its laws.”
Mayer’s five sons were sent to the major capitals of Europe – London, Paris, Vienna, Berlin and Naples – with the mission of establishing a banking system that would be outside government control. The economic and political systems of nations would be controlled not by citizens but by bankers, for the benefit of bankers. Eventually, a privately-owned “central bank” was established in nearly every country; and this central banking system has now gained control over the economies of the world. Central banks have the authority to print money in their respective countries, and it is from these banks that governments must borrow money to pay their debts and fund their operations. The result is a global economy in which not only industry but government itself runs on “credit” (or debt) created by a banking monopoly headed by a network of private central banks; and at the top of this network is the BIS, the “central bank of central banks” in Basel.
Behind the Curtain
For many years the BIS kept a very low profile, operating behind the scenes in an abandoned hotel. It was here that decisions were reached to devalue or defend currencies, fix the price of gold, regulate offshore banking, and raise or lower short-term interest rates. In 1977, however, the BIS gave up its anonymity in exchange for more efficient headquarters. The new building has been described as “an eighteen story-high circular skyscraper that rises above the medieval city like some misplaced nuclear reactor.” It quickly became known as the “Tower of Basel.” Today the BIS has governmental immunity, pays no taxes, and has its own private police force.4 It is, as Mayer Rothschild envisioned, above the law.
The BIS is now composed of 55 member nations, but the club that meets regularly in Basel is a much smaller group; and even within it, there is a hierarchy. In a 1983 article in Harper’s Magazine called “Ruling the World of Money,” Edward Jay Epstein wrote that where the real business gets done is in “a sort of inner club made up of the half dozen or so powerful central bankers who find themselves more or less in the same monetary boat” – those from Germany, the United States, Switzerland, Italy, Japan and England. Epstein said:
“The prime value, which also seems to demarcate the inner club from the rest of the BIS members, is the firm belief that central banks should act independently of their home governments. . . . A second and closely related belief of the inner club is that politicians should not be trusted to decide the fate of the international monetary system.”.........
........In a May 2002 article in The Asia Times titled “Global Economy: The BIS vs. National Banks,” economist Henry C K Liu observed that the Basel Accords have forced national banking systems “to march to the same tune, designed to serve the needs of highly sophisticated global financial markets, regardless of the developmental needs of their national economies.” He wrote:
“[N]ational banking systems are suddenly thrown into the rigid arms of the Basel Capital Accord sponsored by the Bank of International Settlement (BIS), or to face the penalty of usurious risk premium in securing international interbank loans. . . . National policies suddenly are subjected to profit incentives of private financial institutions, all members of a hierarchical system controlled and directed from the money center banks in New York. The result is to force national banking systems to privatize . . . .
“BIS regulations serve only the single purpose of strengthening the international private banking system, even at the peril of national economies. . . . The IMF and the international banks regulated by the BIS are a team: the international banks lend recklessly to borrowers in emerging economies to create a foreign currency debt crisis, the IMF arrives as a carrier of monetary virus in the name of sound monetary policy, then the international banks come as vulture investors in the name of financial rescue to acquire national banks deemed capital inadequate and insolvent by the BIS.”
Ironically, noted Liu, developing countries with their own natural resources did not actually need the foreign investment that trapped them in debt to outsiders:
“Applying the State Theory of Money [which assumes that a sovereign nation has the power to issue its own money], any government can fund with its own currency all its domestic developmental needs to maintain full employment without inflation.”
When governments fall into the trap of accepting loans in foreign currencies, however, they become “debtor nations” subject to IMF and BIS regulation. They are forced to divert their production to exports, just to earn the foreign currency necessary to pay the interest on their loans. National banks deemed “capital inadequate” have to deal with strictures comparable to the “conditionalities” imposed by the IMF on debtor nations: “escalating capital requirement, loan writeoffs and liquidation, and restructuring through selloffs, layoffs, downsizing, cost-cutting and freeze on capital spending.” Liu wrote:
“Reversing the logic that a sound banking system should lead to full employment and developmental growth, BIS regulations demand high unemployment and developmental degradation in national economies as the fair price for a sound global private banking system.”
The Last Domino to Fall
While banks in developing nations were being penalized for falling short of the BIS capital requirements, large international banks managed to escape the rules, although they actually carried enormous risk because of their derivative exposure. The mega-banks succeeded in avoiding the Basel rules by separating the “risk” of default out from the loans and selling it off to investors, using a form of derivative known as “credit default swaps.”
However, it was not in the game plan that U.S. banks should escape the BIS net. When they managed to sidestep the first Basel Accord, a second set of rules was imposed known as Basel II. The new rules were established in 2004, but they were not levied on U.S. banks until November 2007, the month after the Dow passed 14,000 to reach its all-time high. It has been all downhill from there. Basel II had the same effect on U.S. banks that Basel I had on Japanese banks: they have been struggling ever since to survive.8
Basel II requires banks to adjust the value of their marketable securities to the “market price” of the security, a rule called “mark to market.”9 The rule has theoretical merit, but the problem is timing: it was imposed ex post facto, after the banks already had the hard-to-market assets on their books. Lenders that had been considered sufficiently well capitalized to make new loans suddenly found they were insolvent. At least, they would have been insolvent if they had tried to sell their assets, an assumption required by the new rule. Financial analyst John Berlau complained:
“The crisis is often called a ‘market failure,’ and the term ‘mark-to-market’ seems to reinforce that. But the mark-to-market rules are profoundly anti-market and hinder the free-market function of price discovery. . . . In this case, the accounting rules fail to allow the market players to hold on to an asset if they don’t like what the market is currently fetching, an important market action that affects price discovery in areas from agriculture to antiques.”10
Imposing the mark-to-market rule on U.S. banks caused an instant credit freeze, which proceeded to take down the economies not only of the U.S. but of countries worldwide. In early April 2009, the mark-to-market rule was finally softened by the U.S. Financial Accounting Standards Board (FAS; but critics said the modification did not go far enough, and it was done in response to pressure from politicians and bankers, not out of any fundamental change of heart or policies by the BIS........
.........Why did the BIS not retract or at least modify Basel II after seeing the devastation it had caused? Why did it sit idly by as the global economy came crashing down? Was the goal to create so much economic havoc that the world would rush with relief into the waiting arms of the BIS with its privately-created global currency?
Monday, April 13, 2009
SC89-13 / http://jameshowardkunstler.typepad.com/clusterfuck_nation/
The Coming Siege of Austerity
It's a curious symptom of the consensus trance zombifying the American public and its auditors in the media that something like a "recovery" is now deemed to be underway. And, as events compel me to repeat in this space, it begs the question: recovery to what? To Wall Street booking stupendous profits by laundering "risk" out of bad loans with new issues of tranche-o-matic securitized paper? This I doubt, since there isn't a pension fund left from San Jose to Bratislava that would touch this stuff with a stick, even if it could be turned out in collector's editions of boxed sets. Does it mean that American "consumers" (so-called) are awaited momentarily in the flat-screen TV sales parlors with their credit cards fanned-out like poker hands, ready for "action?" Not too likely with massive non-performance out in cardholder-land, and half the nation's electronics inventory wending its way onto Craig's List. Are we expecting more asteroid belts of new suburbs carved in the loamy outlands of Dallas and Minneapolis, complete with new highway strips of Big Box shopping and Chuck E. Cheeses? Go to banking's intensive care unit and inquire (if you can) among the flat-lining production home-builders and the real estate investment trusts on life support when they expect to rev up the heavy equipment.The idea that we're about to resume the insane behavior that induced the current epochal malaise of economy is so absurd it will only be heard in the faculty dining halls of the Ivy League. And if America is not picking up where it left off eighteen months ago -- the orgy of spending future claims on wealth unlikely to accrue -- then what is our destiny? Based on what's out there in the organs of public thinking, it seems that we don't want to think about it.So many forces are arrayed against a return to the previous "normal" that we will be lucky, in another eighteen months, to still find ourselves speaking English and celebrating Christmas. What's "out there" is a panorama of mutually reinforcing critical problems pertaining to how we live on this continent. Like the obesity, heart disease, and diabetes that plague the public, these problems are disorders of lifestyle habits and the only possible "cure" is a comprehensive revision of lifestyle. With the onset of spring weather and the cheez doodles and monster truck rallies and Nascar tailgate barbeques and the drive-in beer emporiums all beckoning, can the public public shift its attention from these infantile preoccupations to saving its own ass?So far, the most striking piece of the economic fiasco is the absence of any galvanizing spirit among the millions getting crushed in the tragic unwind of our relations with money. It will be interesting to see, for instance, if there is any uproar over the evolving story of Goldman Sachs's latest raid on the US Treasury, after booking billions in taxpayer-funded payouts funneled through AIG, based on double-hedged credit default swaps. Such magic tricks are understandably hard to follow, but a dozen-or-so federal attorneys with a middling background in differential calculus might suss out the trail that leads from Ben Bernanke's work station to Lloyd Blankfein's cappuccino machine. Something similar may be said in regard to revelations last week of White House economic advisor Larry Summers' connection with a number of hedge funds shoveling millions into his deep pockets for showing up once a week to cheerlead their "innovations" -- not to mention his shadowy visits to the Goldman Sachs gravy train even after he signed onto the Obama campaign. As long as the stock markets seem to rally -- no matter what else is really going on in America -- nobody will pay much attention to these disgusting irregularities.Since it is that time of year, and I am haunting the gardening shop, one can't fail to notice the many styles of pitchforks for sale. My guess is that the current mood of public paralysis will dissolve in a blur of blood and spittle sometime between Memorial Day and July Fourth, even with Nascar in full swing, and the mushrooming ranks of the unemployed lost in raptures of engine noise and fried cornmeal. It doesn't take too many determined, pissed-off people to create a lot of mischief in a complex society.On the agenda in the second quarter of '09 are ominous rumblings in the oil and food sectors. Half a year of cratered oil prices have decimated the oil industry and we're driving at 100-miles-an-hour straight off a cliff into a new kind of supply crisis -- even if industrial production and global exports remain moribund. So many drilling rigs are being decommissioned that the oil industry itself looks like it's preparing for its own death, investment in exploration and discovery has withered with the credit markets, and the world may never recover from the year long hiccup in oil industry activity -- translation: peak oil is biting back now with a vengeance. Its peakness will look peakier and the yawning arc of depletion beyond will look steeper and pose a threat to every globalized and continental-scale enterprise in the known world.So many dire elements are ranging around our food production system (i.e. farming), from widespread drought and water table depletion to "input" shortages (especially fertilizers) to sickness in credit availability, that we're all one bad harvest away from something that will make Pieter Bruegel-the-elder's "Triumph of Death" look like Vanity Fair's annual Oscar Party in comparison.Barack Obama, charming as he is, had better drop his pretensions about kick-starting the old consumer economy, fire the Wall Street clowns and parasites who are running that futile exercise, and start preparing a US Lifeboat Economy aimed at reducing the scale and scope of our outlays so we can survive the coming siege of austerity. Meanwhile, I'm glad that he finally got a dog for the White House, because the President knows full-well where to turn in Washington if you want some genuine love and affection.
It's a curious symptom of the consensus trance zombifying the American public and its auditors in the media that something like a "recovery" is now deemed to be underway. And, as events compel me to repeat in this space, it begs the question: recovery to what? To Wall Street booking stupendous profits by laundering "risk" out of bad loans with new issues of tranche-o-matic securitized paper? This I doubt, since there isn't a pension fund left from San Jose to Bratislava that would touch this stuff with a stick, even if it could be turned out in collector's editions of boxed sets. Does it mean that American "consumers" (so-called) are awaited momentarily in the flat-screen TV sales parlors with their credit cards fanned-out like poker hands, ready for "action?" Not too likely with massive non-performance out in cardholder-land, and half the nation's electronics inventory wending its way onto Craig's List. Are we expecting more asteroid belts of new suburbs carved in the loamy outlands of Dallas and Minneapolis, complete with new highway strips of Big Box shopping and Chuck E. Cheeses? Go to banking's intensive care unit and inquire (if you can) among the flat-lining production home-builders and the real estate investment trusts on life support when they expect to rev up the heavy equipment.The idea that we're about to resume the insane behavior that induced the current epochal malaise of economy is so absurd it will only be heard in the faculty dining halls of the Ivy League. And if America is not picking up where it left off eighteen months ago -- the orgy of spending future claims on wealth unlikely to accrue -- then what is our destiny? Based on what's out there in the organs of public thinking, it seems that we don't want to think about it.So many forces are arrayed against a return to the previous "normal" that we will be lucky, in another eighteen months, to still find ourselves speaking English and celebrating Christmas. What's "out there" is a panorama of mutually reinforcing critical problems pertaining to how we live on this continent. Like the obesity, heart disease, and diabetes that plague the public, these problems are disorders of lifestyle habits and the only possible "cure" is a comprehensive revision of lifestyle. With the onset of spring weather and the cheez doodles and monster truck rallies and Nascar tailgate barbeques and the drive-in beer emporiums all beckoning, can the public public shift its attention from these infantile preoccupations to saving its own ass?So far, the most striking piece of the economic fiasco is the absence of any galvanizing spirit among the millions getting crushed in the tragic unwind of our relations with money. It will be interesting to see, for instance, if there is any uproar over the evolving story of Goldman Sachs's latest raid on the US Treasury, after booking billions in taxpayer-funded payouts funneled through AIG, based on double-hedged credit default swaps. Such magic tricks are understandably hard to follow, but a dozen-or-so federal attorneys with a middling background in differential calculus might suss out the trail that leads from Ben Bernanke's work station to Lloyd Blankfein's cappuccino machine. Something similar may be said in regard to revelations last week of White House economic advisor Larry Summers' connection with a number of hedge funds shoveling millions into his deep pockets for showing up once a week to cheerlead their "innovations" -- not to mention his shadowy visits to the Goldman Sachs gravy train even after he signed onto the Obama campaign. As long as the stock markets seem to rally -- no matter what else is really going on in America -- nobody will pay much attention to these disgusting irregularities.Since it is that time of year, and I am haunting the gardening shop, one can't fail to notice the many styles of pitchforks for sale. My guess is that the current mood of public paralysis will dissolve in a blur of blood and spittle sometime between Memorial Day and July Fourth, even with Nascar in full swing, and the mushrooming ranks of the unemployed lost in raptures of engine noise and fried cornmeal. It doesn't take too many determined, pissed-off people to create a lot of mischief in a complex society.On the agenda in the second quarter of '09 are ominous rumblings in the oil and food sectors. Half a year of cratered oil prices have decimated the oil industry and we're driving at 100-miles-an-hour straight off a cliff into a new kind of supply crisis -- even if industrial production and global exports remain moribund. So many drilling rigs are being decommissioned that the oil industry itself looks like it's preparing for its own death, investment in exploration and discovery has withered with the credit markets, and the world may never recover from the year long hiccup in oil industry activity -- translation: peak oil is biting back now with a vengeance. Its peakness will look peakier and the yawning arc of depletion beyond will look steeper and pose a threat to every globalized and continental-scale enterprise in the known world.So many dire elements are ranging around our food production system (i.e. farming), from widespread drought and water table depletion to "input" shortages (especially fertilizers) to sickness in credit availability, that we're all one bad harvest away from something that will make Pieter Bruegel-the-elder's "Triumph of Death" look like Vanity Fair's annual Oscar Party in comparison.Barack Obama, charming as he is, had better drop his pretensions about kick-starting the old consumer economy, fire the Wall Street clowns and parasites who are running that futile exercise, and start preparing a US Lifeboat Economy aimed at reducing the scale and scope of our outlays so we can survive the coming siege of austerity. Meanwhile, I'm glad that he finally got a dog for the White House, because the President knows full-well where to turn in Washington if you want some genuine love and affection.
Sunday, April 12, 2009
SC89-12 / http://jameshowardkunstler.typepad.com/clusterfuck_nation/
Strange Days
Even while a wave of reflex nausea washed over America last week, and the unemployment rolls swelled by much more than another half million, the greatest stock market suckers' rally in seventy years pulled in the last of the credulous. These are strange days. The earth is heaving and the buds swelling again -- at least north of the equator, where most of the action is -- and the global economy, which was supposed to be a permanent new add-on to the human condition, is sloughing away in big horrid gobs. But no one in charge of anything can believe it. The banking fiasco has introduced so much noise into the system that world leadership can't think straight.What they're missing is real simple: peak oil means no more ability to service debt at all levels, personal, corporate, and government. End of story. All the other exertions being performed in opposition to this basic fact-of-life amount to a spastic soft-shoe performed before a smokescreen concealing a world of hurt. If the "quantitative easing" (money creation) and fiscal legerdemain (TARPs, TARFs, et cetera) happen to jack up the "velocity" of the new funny-money, and the world resumes its previous level of oil use, the price of oil would rise again -- this time astronomically because the previous crash of oil prices crushed the development of new oil projects to offset depletion -- and the global economy will crash again. Only the next phase of the disease is liable to move beyond the financial and into the social and political realms. Disorder of various kinds will rule -- toppled governments, civil unrest, international tension and conflict.The US is doing everything possible to avoid these awful realities, but probably the worst self-deception is the idea that everything would be okay if we could just "re-start lending." That's just not going to happen. There is no more capacity to service the debt we've already piled on. Americans borrowed too much, and the bankers who made obscene fortunes in fees and bonuses in fraudulent lending managed to leverage this unpayable debt into the greatest collective swindle the world has ever known. The swindle has sent poison into every cell of the macro socio-economic organism, and further swindles are unlikely to revive it.The rally in stocks, the financials in particular, could go on for another month or two. In the meantime, banks are striving desperately to avoid calling in more bad loans -- especially in commercial real estate, malls, strip malls, Big Box power centers -- because they don't want any more losses on their balance sheets. That can only go on for so long, too. Sooner or later the daisy chain of credibility in the fundamental transactions of business lose legitimacy and something's got to give.My guess is it will first take the form, sometime after Memorial Day (but maybe sooner) of wholesale liquidations of everything under the North American sun: companies, households, chattels, US Treasury paper of all kinds, and, of course, the S & P 500. We'll soon find out whether an organism the size of the United States can run an economy based on one family selling the contents of its garage to the family next door. My guess is that this type of economy won't support the standards of living previously enjoyed in places like Dallas and Minneapolis.The socio-political fallout from the inherent anger and disappointment in all this is liable to be severe. The public is already warming up for it, with cheerleaders such as Glen Beck on Fox TV News calling for the formation of militias, and gun sales moving out-of-sight. One mistake that the banking elite and their lawyer paladins made the past decade was their show of conspicuous acquisition -- of houses especially -- in easy-to-get-to places where anyone can see them, for instance an angry mob in Fairfield County, Connecticut, or Easthampton, New York. Unlike the beleaguered elites of South Africa (where I visited recently), who live behind layers of fortification, the executives of Citibank, Goldman Sachs, J.P. Morgan, and a long list of hedge funds, will be found cringing in their wine-lockers behind a measly layer of privet hedge when the tattooed minions of Glen Beck come a'calling. This could perhaps be avoided if someone in authority like US Attorney General Eric Holder took an aggressive interest in the multiple swindles of the decade past, and commenced some prosecutions. But the window of opportunity for this sort of meliorating action may close sooner than the government and the mainstream media believe. Social phase-change, as in the formations of mobs, is nothing to screw around with. Once the first window is broken, all bets are off for social stability. My guess is that the various bail-out gifts to the bankers are long past having gone too far in the eyes of this increasingly flammable public.We have no previous experience with this type of social unrest. The violence of the Vietnam era will look very limited and reasonable in comparison -- in the sense that it was an uprising on the grounds of principle, not survival. And the Civil War was a wholly regimented affair between two rival factions. This time, people with little interest in principle beyond some dim idea of economic fairness, will be hoisting the flaming brands out of sheer grievance and malice. By the time Lloyd Blankfein sees the torches flickering through his privet, it will be too late to defend the honor of his cappuccino machine.President Obama will have to starkly change his current game plan if this outcome is to be avoided. I think he's capable of turning off the mob -- of preventing the grasshoppers from turning into ravening locusts -- but it may take an extraordinary exercise in authority to do it, such as the true (not pretend) nationalization of the big banks, engineering the exit of Ben Bernanke from the Federal Reserve, sucking up the ignominy of having to replace failed regulator Tim Geithner in the Treasury Department, and calling out the dogs on the swindlers who had the gall to play their country for a sucker.As I've averred more than a few times in this space before, the standard of living in America has got to come way down. We mortgaged our future and the future has now begun. Tough noogies for us. But the broad public won't accept the reality of this as long as the grandees of finance and their myrmidons appear to still enjoy the high life. They've got to be brought down hard, perhaps even disgraced and humiliated in the courts, and certainly parted from some of their fortunes -- if only in lawyer's fees. Mr. Obama pretty much served notice to this effect last week, telling a delegation of bankers in the White House that he was the only thing standing between them and "the pitchforks." It's possible he understands the situation.
Even while a wave of reflex nausea washed over America last week, and the unemployment rolls swelled by much more than another half million, the greatest stock market suckers' rally in seventy years pulled in the last of the credulous. These are strange days. The earth is heaving and the buds swelling again -- at least north of the equator, where most of the action is -- and the global economy, which was supposed to be a permanent new add-on to the human condition, is sloughing away in big horrid gobs. But no one in charge of anything can believe it. The banking fiasco has introduced so much noise into the system that world leadership can't think straight.What they're missing is real simple: peak oil means no more ability to service debt at all levels, personal, corporate, and government. End of story. All the other exertions being performed in opposition to this basic fact-of-life amount to a spastic soft-shoe performed before a smokescreen concealing a world of hurt. If the "quantitative easing" (money creation) and fiscal legerdemain (TARPs, TARFs, et cetera) happen to jack up the "velocity" of the new funny-money, and the world resumes its previous level of oil use, the price of oil would rise again -- this time astronomically because the previous crash of oil prices crushed the development of new oil projects to offset depletion -- and the global economy will crash again. Only the next phase of the disease is liable to move beyond the financial and into the social and political realms. Disorder of various kinds will rule -- toppled governments, civil unrest, international tension and conflict.The US is doing everything possible to avoid these awful realities, but probably the worst self-deception is the idea that everything would be okay if we could just "re-start lending." That's just not going to happen. There is no more capacity to service the debt we've already piled on. Americans borrowed too much, and the bankers who made obscene fortunes in fees and bonuses in fraudulent lending managed to leverage this unpayable debt into the greatest collective swindle the world has ever known. The swindle has sent poison into every cell of the macro socio-economic organism, and further swindles are unlikely to revive it.The rally in stocks, the financials in particular, could go on for another month or two. In the meantime, banks are striving desperately to avoid calling in more bad loans -- especially in commercial real estate, malls, strip malls, Big Box power centers -- because they don't want any more losses on their balance sheets. That can only go on for so long, too. Sooner or later the daisy chain of credibility in the fundamental transactions of business lose legitimacy and something's got to give.My guess is it will first take the form, sometime after Memorial Day (but maybe sooner) of wholesale liquidations of everything under the North American sun: companies, households, chattels, US Treasury paper of all kinds, and, of course, the S & P 500. We'll soon find out whether an organism the size of the United States can run an economy based on one family selling the contents of its garage to the family next door. My guess is that this type of economy won't support the standards of living previously enjoyed in places like Dallas and Minneapolis.The socio-political fallout from the inherent anger and disappointment in all this is liable to be severe. The public is already warming up for it, with cheerleaders such as Glen Beck on Fox TV News calling for the formation of militias, and gun sales moving out-of-sight. One mistake that the banking elite and their lawyer paladins made the past decade was their show of conspicuous acquisition -- of houses especially -- in easy-to-get-to places where anyone can see them, for instance an angry mob in Fairfield County, Connecticut, or Easthampton, New York. Unlike the beleaguered elites of South Africa (where I visited recently), who live behind layers of fortification, the executives of Citibank, Goldman Sachs, J.P. Morgan, and a long list of hedge funds, will be found cringing in their wine-lockers behind a measly layer of privet hedge when the tattooed minions of Glen Beck come a'calling. This could perhaps be avoided if someone in authority like US Attorney General Eric Holder took an aggressive interest in the multiple swindles of the decade past, and commenced some prosecutions. But the window of opportunity for this sort of meliorating action may close sooner than the government and the mainstream media believe. Social phase-change, as in the formations of mobs, is nothing to screw around with. Once the first window is broken, all bets are off for social stability. My guess is that the various bail-out gifts to the bankers are long past having gone too far in the eyes of this increasingly flammable public.We have no previous experience with this type of social unrest. The violence of the Vietnam era will look very limited and reasonable in comparison -- in the sense that it was an uprising on the grounds of principle, not survival. And the Civil War was a wholly regimented affair between two rival factions. This time, people with little interest in principle beyond some dim idea of economic fairness, will be hoisting the flaming brands out of sheer grievance and malice. By the time Lloyd Blankfein sees the torches flickering through his privet, it will be too late to defend the honor of his cappuccino machine.President Obama will have to starkly change his current game plan if this outcome is to be avoided. I think he's capable of turning off the mob -- of preventing the grasshoppers from turning into ravening locusts -- but it may take an extraordinary exercise in authority to do it, such as the true (not pretend) nationalization of the big banks, engineering the exit of Ben Bernanke from the Federal Reserve, sucking up the ignominy of having to replace failed regulator Tim Geithner in the Treasury Department, and calling out the dogs on the swindlers who had the gall to play their country for a sucker.As I've averred more than a few times in this space before, the standard of living in America has got to come way down. We mortgaged our future and the future has now begun. Tough noogies for us. But the broad public won't accept the reality of this as long as the grandees of finance and their myrmidons appear to still enjoy the high life. They've got to be brought down hard, perhaps even disgraced and humiliated in the courts, and certainly parted from some of their fortunes -- if only in lawyer's fees. Mr. Obama pretty much served notice to this effect last week, telling a delegation of bankers in the White House that he was the only thing standing between them and "the pitchforks." It's possible he understands the situation.
SC89-11 / http://www.fcnp.com/index.php?option=com_content&view=article&id=4329:the-peak-oil-crisis-priorities&catid=13:news-stories&Itemid=76
The peak oil crisis: priorities
In the next few years, most of us are going to have to make many important decisions that will profoundly affect the rest of our lives. How soon these decisions come will depend on one's individual circumstances.
If you are one of the millions who have lost their jobs or homes in the last year then you already know that something is happening. Returning to the way we have lived for the last 100 years simply is not in the cards. The world is entering a great paradigm shift and our place in it will be markedly different 10 or 20 years from now. The most alarming thing to remember is that 95 percent of us have not discovered that major changes are underway and are waiting for economic recovery and new jobs to open up.
A professor out in California just published a paper concluding that the current economic downturn was caused as much by the $147 oil we saw last summer as it was by the bursting of the housing and credit bubbles. It doesn't much matter if he is right or not. What is important, however, is that hardly a day goes by without another major oil production project being delayed or cancelled due to low prices. The death spiral for the oil age has begun.
The U.S. is currently losing about 600,000 jobs a month. If we did the bookkeeping a bit more honestly, to account for the discouraged or those forced into part-time work, the real total is probably closer to 1 million a month. This hemorrhage may slow for a time when our trillion dollar stimulus catches hold, but there is nothing out there to suggest that spending borrowed or printed money for a year or two is going to turn anything around. The trends all suggest that unemployment is going to continue rising and that social unrest is not very far away.
Someday, many years or decades from now, all this is going to stabilize. Just what the world will look like is impossible to forecast. Will there still be 6.7 billion of us around or will the world's population have declined from deteriorating climate conditions and a lack of food. The only thing for sure is that there is going to be a lot less fossil fuel around to do the heavy work for us.
The last 100 years, particularly the last 50, have been a magic time. The exploitation of fossil fuels has given mankind an era of incredible riches and, for many, unprecedented freedoms to pursue whatever they choose. Now that time is over and humanity is going to have to reprioritize to the basics of life -- food, warmth, shelter, health care, sanitation, and security.
If the oil age had come and gone in a few decades mankind would not have had the opportunity to reorganize our lifestyles so dramatically from the way we lived in the 19th century, but it is too late now. Recent estimates say that nearly half of the world's population now lives in urban areas where they are dependent on others for food. In America, only three percent of us are left on farms to feed the other 97 percent. This is going to be a real problem for if there is anything we really need to do every day, it is to eat.
With shrinking amounts of increasingly expensive fossil fuels, the American way of agriculture is going to be severely tested. Throw in some climate change and our food producers are going to have trouble keeping up with the demand. Many are worried about depleted soils, and the vast amounts of energy required to grow, store, process, and transfer food raised thousands of miles from the consumer. Then there is the growing problem of paying for food when one does not have a job. For the last 100 years the cost of food was a decreasing part of the average American's budget. That is starting to reverse and it will not be long before the discretionary spending that many have enjoyed in recent decades dwindles as more of our incomes go for the essentials of life.
Much food in America currently is being paid for by unsecured credit cards in the hands of people who will never be able to pay. The banks have already reduced the number of open cards from a high of 483 million last July to 400 million. This number will continue to shrink as delinquencies soar and the banks realize they will never be paid back. As with food, the same sort of problems are arising with health care, and housing. Sanitation and public safety, being largely a responsibility of government rather than individuals is, safe for the minute, but governments are facing growing problems. If, as seems likely, government takes on increasing burdens of feeding and housing people, some new form of social contract is going to have to be worked out.
We are already hearing the opening sounds of what may be the greatest political debate of the 21st Century - how do we get out of this mess. On one side are those who continue to believe that free markets, tax cuts, and offshore drilling, will return things to normal. The other side recognizes the magnitude of the challenge we face, but so far have not publically connected the dots.
This great debate will continue in the Congress, state houses, and local board rooms for a long while as the balance teeters between maxims of the 20th century and realities of the 21st. The break will come with social unrest. It has been a long time since mobs took to American streets in protest. Although common in other parts of the world, one has to look back to the 1960's to find serious social unrest in the US.
This time riots will be for food and jobs rather than for civil rights and against the draft. The unrest will change everything. Governments will realize that changing times require changing institutions and new priorities. The mix between capitalism and government involvement in the economy is going to change for there no way that our current institutions and economic arrangements are going to get us through the next 40 years.
In the next few years, most of us are going to have to make many important decisions that will profoundly affect the rest of our lives. How soon these decisions come will depend on one's individual circumstances.
If you are one of the millions who have lost their jobs or homes in the last year then you already know that something is happening. Returning to the way we have lived for the last 100 years simply is not in the cards. The world is entering a great paradigm shift and our place in it will be markedly different 10 or 20 years from now. The most alarming thing to remember is that 95 percent of us have not discovered that major changes are underway and are waiting for economic recovery and new jobs to open up.
A professor out in California just published a paper concluding that the current economic downturn was caused as much by the $147 oil we saw last summer as it was by the bursting of the housing and credit bubbles. It doesn't much matter if he is right or not. What is important, however, is that hardly a day goes by without another major oil production project being delayed or cancelled due to low prices. The death spiral for the oil age has begun.
The U.S. is currently losing about 600,000 jobs a month. If we did the bookkeeping a bit more honestly, to account for the discouraged or those forced into part-time work, the real total is probably closer to 1 million a month. This hemorrhage may slow for a time when our trillion dollar stimulus catches hold, but there is nothing out there to suggest that spending borrowed or printed money for a year or two is going to turn anything around. The trends all suggest that unemployment is going to continue rising and that social unrest is not very far away.
Someday, many years or decades from now, all this is going to stabilize. Just what the world will look like is impossible to forecast. Will there still be 6.7 billion of us around or will the world's population have declined from deteriorating climate conditions and a lack of food. The only thing for sure is that there is going to be a lot less fossil fuel around to do the heavy work for us.
The last 100 years, particularly the last 50, have been a magic time. The exploitation of fossil fuels has given mankind an era of incredible riches and, for many, unprecedented freedoms to pursue whatever they choose. Now that time is over and humanity is going to have to reprioritize to the basics of life -- food, warmth, shelter, health care, sanitation, and security.
If the oil age had come and gone in a few decades mankind would not have had the opportunity to reorganize our lifestyles so dramatically from the way we lived in the 19th century, but it is too late now. Recent estimates say that nearly half of the world's population now lives in urban areas where they are dependent on others for food. In America, only three percent of us are left on farms to feed the other 97 percent. This is going to be a real problem for if there is anything we really need to do every day, it is to eat.
With shrinking amounts of increasingly expensive fossil fuels, the American way of agriculture is going to be severely tested. Throw in some climate change and our food producers are going to have trouble keeping up with the demand. Many are worried about depleted soils, and the vast amounts of energy required to grow, store, process, and transfer food raised thousands of miles from the consumer. Then there is the growing problem of paying for food when one does not have a job. For the last 100 years the cost of food was a decreasing part of the average American's budget. That is starting to reverse and it will not be long before the discretionary spending that many have enjoyed in recent decades dwindles as more of our incomes go for the essentials of life.
Much food in America currently is being paid for by unsecured credit cards in the hands of people who will never be able to pay. The banks have already reduced the number of open cards from a high of 483 million last July to 400 million. This number will continue to shrink as delinquencies soar and the banks realize they will never be paid back. As with food, the same sort of problems are arising with health care, and housing. Sanitation and public safety, being largely a responsibility of government rather than individuals is, safe for the minute, but governments are facing growing problems. If, as seems likely, government takes on increasing burdens of feeding and housing people, some new form of social contract is going to have to be worked out.
We are already hearing the opening sounds of what may be the greatest political debate of the 21st Century - how do we get out of this mess. On one side are those who continue to believe that free markets, tax cuts, and offshore drilling, will return things to normal. The other side recognizes the magnitude of the challenge we face, but so far have not publically connected the dots.
This great debate will continue in the Congress, state houses, and local board rooms for a long while as the balance teeters between maxims of the 20th century and realities of the 21st. The break will come with social unrest. It has been a long time since mobs took to American streets in protest. Although common in other parts of the world, one has to look back to the 1960's to find serious social unrest in the US.
This time riots will be for food and jobs rather than for civil rights and against the draft. The unrest will change everything. Governments will realize that changing times require changing institutions and new priorities. The mix between capitalism and government involvement in the economy is going to change for there no way that our current institutions and economic arrangements are going to get us through the next 40 years.
SC89-10 / http://www.globalresearch.ca/index.php?context=va&aid=13109
The Economic Crisis: No, this will not be a Normal Cyclical Recovery
.............Even my anecdotal experience contradicts Altman. Throughout the past decade, in conversations with fellow workers, neighbors, friends, and relatives, not one single time have I heard anyone boast about his/her increased feelings of wealth. They did, however, complain about the increased costs of essential products and services and the lowering of the real-dollar value of their incomes. They did not borrow because they felt wealthier; they borrowed to supplement their declining incomes in an inflationary economy. And bankers enabled them, encouraged them, to do it by offering easy loans with low payments without ever revealing the true costs of those loans. Consumers borrowed not because they felt wealthier, they borrowed because they needed the money. And when the Ponzi bankers' schemes brought down the economy, repaying the loans became impossible, job losses eliminated incomes, and consumer purchasing declined. Unless jobs are generated that provide sufficient income to regenerate a consuming economy, this will not be a normal cyclical recovery.
It, however, is not obvious that such jobs will materialize. Over the last quarter century, American business has moved myriad higher paying jobs to foreign countries which depend upon American consumers to purchase the products produced for the American companies that moved their manufacturing overseas. Even Obama says that these jobs are not coming back. The infrastructure to recreate these jobs no longer exists in America. The businesses that still provide such jobs are asking, in some cases requiring, workers to work for lower wages. The lost jobs and lowered wages mean lower consumption for the unforeseeable future. When the big three automobile companies reduce their workforces and pay lower wages, they are, in reality, reducing the market not only for automobiles but also for products and services of all kinds. So how can bankers be expected to increase lending? Who will the credit worthy borrowers be? Certainly not the people without jobs or with reduced incomes or with reduced credit scores because of recent defaults. Certainly not businesses with fewer sales and lower profits. The lending will not materialize no matter how the failing banks are recapitalized. Furthermore, the number of jobs that need to be created for a recovery is a multiple of the number lost if the wages paid by the new jobs is less than those paid by the lost jobs. So no, this will not be a normal cyclical recovery.
Some economists have begun to speak of another "jobless recovery." I can't even imagine what that could mean? About three quarters of the American economy was driven by consumption. Without a regeneration of the levels of consumption needed to drive this portion of the economy, nothing that can truly be called a recovery can happen. The way out of this crisis is not to recapitalize the banks, but rather to recapitalize consumers. Given the political ideologies active in the United States of America, I doubt that that will ever happen. After all, the business of America is business, not the welfare of its people.
Economists and politicians are blaming this crisis on faulty practices carried out by the financial industry. And no one has pointed out how retirement investment plans such as 401Ks regularly pumped money into the stock market and contributed to the bubble. These practices may have precipitated the crisis, but given the assault on the wages of working class Americans and the shifting of higher-paying jobs to foreign countries, an economic collapse, sooner or later, was inevitable. Anyone who can perform simple arithmetical calculations should have known it.
When a nation consigns its people to working for meager wages, its prosperity is doomed. The Congress, at the behest of corporate lobbyists, wrote into legislation the rules that permitted companies to offshore jobs, reduce real wages, and permit risky financial practices. Therein lies the root cause of this crisis. People merely do what the law allows. Without a prosperous people, America cannot be a prosperous nation. So welcome America to the third-world......
But wait, things economically are starting to turn around, starting to improve, right? I mean Wells Fargo just announced it will have a record 3 Billion profit for its first quarter earnings. With great news like that, the good times must be just around the corner! The 40 billion they got of tax payer bailout money surely has nothing to do with Wells Fargos record performance. Think any of us could show a profit if our businesses were " GIVEN " 40 billion dollars to help the bottom line? All the happy economic talk spewing in the last few weeks from Obama and the corporation controlled media is total BS when you look at the fundamentals of whats really happening to the economic realities of real people in the US and those throughout the world's industrial economies. The latest mental diversion tactic to keep the public focused on meaningless nonsense rather than the real gigantic scams that have occured and are on going ( mass bailouts of the elites and their banks, giant ponzi schemes, AIG, etc ) is that suddenly PIRATE ATTACKS are the most important thing we should be concerned with. Forget the insane mass rippoffs from the banksters and the elites who own these casino's, the real problems that will effect you and your family is PIRATES off the coast of Somalia. Who would have known?
.............Even my anecdotal experience contradicts Altman. Throughout the past decade, in conversations with fellow workers, neighbors, friends, and relatives, not one single time have I heard anyone boast about his/her increased feelings of wealth. They did, however, complain about the increased costs of essential products and services and the lowering of the real-dollar value of their incomes. They did not borrow because they felt wealthier; they borrowed to supplement their declining incomes in an inflationary economy. And bankers enabled them, encouraged them, to do it by offering easy loans with low payments without ever revealing the true costs of those loans. Consumers borrowed not because they felt wealthier, they borrowed because they needed the money. And when the Ponzi bankers' schemes brought down the economy, repaying the loans became impossible, job losses eliminated incomes, and consumer purchasing declined. Unless jobs are generated that provide sufficient income to regenerate a consuming economy, this will not be a normal cyclical recovery.
It, however, is not obvious that such jobs will materialize. Over the last quarter century, American business has moved myriad higher paying jobs to foreign countries which depend upon American consumers to purchase the products produced for the American companies that moved their manufacturing overseas. Even Obama says that these jobs are not coming back. The infrastructure to recreate these jobs no longer exists in America. The businesses that still provide such jobs are asking, in some cases requiring, workers to work for lower wages. The lost jobs and lowered wages mean lower consumption for the unforeseeable future. When the big three automobile companies reduce their workforces and pay lower wages, they are, in reality, reducing the market not only for automobiles but also for products and services of all kinds. So how can bankers be expected to increase lending? Who will the credit worthy borrowers be? Certainly not the people without jobs or with reduced incomes or with reduced credit scores because of recent defaults. Certainly not businesses with fewer sales and lower profits. The lending will not materialize no matter how the failing banks are recapitalized. Furthermore, the number of jobs that need to be created for a recovery is a multiple of the number lost if the wages paid by the new jobs is less than those paid by the lost jobs. So no, this will not be a normal cyclical recovery.
Some economists have begun to speak of another "jobless recovery." I can't even imagine what that could mean? About three quarters of the American economy was driven by consumption. Without a regeneration of the levels of consumption needed to drive this portion of the economy, nothing that can truly be called a recovery can happen. The way out of this crisis is not to recapitalize the banks, but rather to recapitalize consumers. Given the political ideologies active in the United States of America, I doubt that that will ever happen. After all, the business of America is business, not the welfare of its people.
Economists and politicians are blaming this crisis on faulty practices carried out by the financial industry. And no one has pointed out how retirement investment plans such as 401Ks regularly pumped money into the stock market and contributed to the bubble. These practices may have precipitated the crisis, but given the assault on the wages of working class Americans and the shifting of higher-paying jobs to foreign countries, an economic collapse, sooner or later, was inevitable. Anyone who can perform simple arithmetical calculations should have known it.
When a nation consigns its people to working for meager wages, its prosperity is doomed. The Congress, at the behest of corporate lobbyists, wrote into legislation the rules that permitted companies to offshore jobs, reduce real wages, and permit risky financial practices. Therein lies the root cause of this crisis. People merely do what the law allows. Without a prosperous people, America cannot be a prosperous nation. So welcome America to the third-world......
But wait, things economically are starting to turn around, starting to improve, right? I mean Wells Fargo just announced it will have a record 3 Billion profit for its first quarter earnings. With great news like that, the good times must be just around the corner! The 40 billion they got of tax payer bailout money surely has nothing to do with Wells Fargos record performance. Think any of us could show a profit if our businesses were " GIVEN " 40 billion dollars to help the bottom line? All the happy economic talk spewing in the last few weeks from Obama and the corporation controlled media is total BS when you look at the fundamentals of whats really happening to the economic realities of real people in the US and those throughout the world's industrial economies. The latest mental diversion tactic to keep the public focused on meaningless nonsense rather than the real gigantic scams that have occured and are on going ( mass bailouts of the elites and their banks, giant ponzi schemes, AIG, etc ) is that suddenly PIRATE ATTACKS are the most important thing we should be concerned with. Forget the insane mass rippoffs from the banksters and the elites who own these casino's, the real problems that will effect you and your family is PIRATES off the coast of Somalia. Who would have known?
SC89-9 / http://www.globalresearch.ca/index.php?context=va&aid=13131
Economic Crisis: No End In Sight Worse than the Great Depression
...........The obvious implication: most of the 2009 US fiscal deficit WILL NEED TO BE FINANCED DOMESTICALLY. The Fed’s custodial data indicates central banks are still buying Treasuries, though at a somewhat slower pace than in late 2008. But their demand hasn’t kept up with issuance. (Foreign Central banks aren't going to finance much of the 2009 US fiscal deficit; Their reserves aren't growing anymore", Brad Setser, Council on Foreign Relations)
The United States does not have the reserves to finance it own massive deficits which will soar to $1.9 trillion by the end of 2009. The Fed will have to increase its purchases of US Treasuries and monetize the debt. Foreign holders of Treasuries and dollar-backed assets ($5 trillion overseas) will be watching carefully as Bernanke revs up the printing presses to fight the recession and meet government obligations. China, Russia, Venezuela and Iran have already called for a change in the world's reserve currency. It won't happen overnight, but the momentum is steadily growing.
The S&P 500 has soared 23 percent in the last four weeks, but the current bear market rally is misleading. The prospects for a quick recovery are remote at best. The fundamentals are all weak. Corporate profits are down, GDP is negative 6 percent, housing is in a shambles, and the banking system broken. The Fed has increased the money supply by 22 percent, but economic activity is at a standstill. The velocity at which money is spent is the slowest since 1987. Nothing is moving. The banks are hoarding, credit has dried up, and consumers are saving for the first time in 2 decades. The banks' credit-conduit cannot function properly until bad assets are removed from their balance sheets. But the magnitude of the losses make it impossible for the government to purchase them outright without bankrupting the country. According to the Times Online, the IMF has increased its estimates of how much toxic mortgage-backed paper the banks are holding:
"Toxic debts racked up by banks and insurers could spiral to $4 trillion, new forecasts from the International Monetary Fund (IMF) are set to suggest.
The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21. In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia.
Banks and insurers, which so far have owned up to $1.29 trillion in toxic assets, are facing increasing losses as the deepening recession takes a toll, adding to the debts racked up from sub-prime mortgages. The IMF's new forecast, which could be revised again before the end of the month, will come as a blow to governments that have already pumped billions into the banking system."
Since banks lend at a ratio of 10 to 1; the amount of credit cut off to the broader economy will ensure that sluggish growth well into the future. If there is a recovery, it will be weak. The Obama administration will have to increase its capital injections even though they will add to mushrooming deficits. So far, financial institutions have only written down $1 trillion or 25 percent of their losses. This means the banking system is insolvent. Eventually, Obama will have to resolve the bad banks and auction off troubled assets, even though political support is rapidly eroding. According to political analyst F. William Engdahl, most of the garbage assets are concentrated in the nation's five biggest banks:
"Today five US banks according to data in the just-released Federal Office of Comptroller of the Currency’s Quarterly Report on Bank Trading and Derivatives Activity, hold 96% of all US bank derivatives positions in terms of nominal values, and an eye-popping 81% of the total net credit risk exposure in event of default.
The five are, in declining order of importance: JPMorgan Chase which holds a staggering $88 trillion in derivatives (€66 trillion!). Morgan Chase is followed by Bank of America with $38 trillion in derivatives, and Citibank with $32 trillion. Number four in the derivatives sweepstakes is Goldman Sachs with a ‘mere’ $30 trillion in derivatives. Number five, the merged Wells Fargo-Wachovia Bank, drops dramatically in size to $5 trillion. Number six, Britain’s HSBC Bank USA has $3.7 trillion. ("Geithner’s ‘Dirty Little Secret’: The Entire Global Financial System is at Risk", F. William Engdahl, Global Research)
These five banking Goliaths are at the center of political power in America today. Their White House emissary, Timothy Geithner, has concocted a rescue plan--the Public-Private Investment Program--which will provide 94 percent funding from the FDIC for the purchase bad assets. The program is designed to keep asset prices artificially high while transferring the bulk of the losses to the taxpayer. The plan has been widely criticized and has even raised a few eyebrows even among usually-supportive members of the establishment like the Financial Times:
"US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JP Morgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.
The plans proved controversial, with critics charging that the government’s public-private partnership - which provide generous loans to investors - are intended to help banks sell, rather than acquire, troubled securities and loans.
Banks have three options if they want to buy toxic assets: apply to become one of four or five fund managers that will purchase troubled securities; bid for packages of bad loans; or buy into funds set up by others. The government plan does not allow banks to buy their own assets, but there is no ban on the purchase of securities and loans sold by others." (The Financial Times)
It's a multi-billion dollar shell game with myriad opportunities for fraud. In theory, the banks could create their own off-balance sheet operations (SIVs or SPEs) and use them to purchase their own bad assets taking advantage of the government's 94 percent low interest non recourse loans. It's a blatant swindle and another windfall for Wall Street.
Geithner's plan does not fix the problems with the banks, it only delays the final outcome. The next leg-down in the recession will push many of the undercapitalized banks into receivership. Geithner's PPIP won't change that. As housing prices fall and foreclosures rise, the capital position of many of the banks will become untenable leading to a rash of bank failures. An article in Monday's Wall Street Journal puts adds some historical perspective to today's financial crisis:
"The events of the past 10 years have an eerie similarity to the period leading up to the Great Depression. Total mortgage debt outstanding increased from $9.35 billion in 1920 to $29.44 billion in 1929. In 1920, residential mortgage debt was 10.2% of household wealth; by 1929, it was 27.2% of household wealth....
The causes of the Great Depression need more study, but the claims that losses on stock-market speculation and a monetary contraction caused the decline of the banking system both seem inadequate. It appears that both the Great Depression and the current crisis had their origins in excessive consumer debt -- especially mortgage debt -- that was transmitted into the financial sector during a sharp downturn.
Why does one crash cause minimal damage to the financial system, so that the economy can pick itself up quickly, while another crash leaves a devastated financial sector in the wreckage? The hypothesis we propose is that a financial crisis that originates in consumer debt, especially consumer debt concentrated at the low end of the wealth and income distribution, can be transmitted quickly and forcefully into the financial system. It appears that we're witnessing the second great consumer debt crash, the end of a massive consumption binge." (From Bubble to Depression? Steven Gjerstad and Vernon L. Smith, Wall Street Journal)
PARTY LIKE ITS 1929
Two leading economic historians, Barry Eichengreen and Kevin H. Rourke, have written an article "A Tale of Two Depressions" which has been widely circulated on the Internet. It illustrates (with graphs) how the global economy is plummeting faster now than during the 1930s. http://www.voxeu.org/index.php?q=node/3421
By nearly every objective standard, the present downturn is worse than the Great Depression. Manufacturing, industrial production, foreign trade, capital flows, consumer confidence, housing, and even stocks are falling faster today than after the crash of 1929. So far, Bernanke's monetary bandaids have prevented the wholesale collapse of the financial system, but that could change. The economy continues its downhill slide and it looks like there's nothing to stop it from falling further still.
...........The obvious implication: most of the 2009 US fiscal deficit WILL NEED TO BE FINANCED DOMESTICALLY. The Fed’s custodial data indicates central banks are still buying Treasuries, though at a somewhat slower pace than in late 2008. But their demand hasn’t kept up with issuance. (Foreign Central banks aren't going to finance much of the 2009 US fiscal deficit; Their reserves aren't growing anymore", Brad Setser, Council on Foreign Relations)
The United States does not have the reserves to finance it own massive deficits which will soar to $1.9 trillion by the end of 2009. The Fed will have to increase its purchases of US Treasuries and monetize the debt. Foreign holders of Treasuries and dollar-backed assets ($5 trillion overseas) will be watching carefully as Bernanke revs up the printing presses to fight the recession and meet government obligations. China, Russia, Venezuela and Iran have already called for a change in the world's reserve currency. It won't happen overnight, but the momentum is steadily growing.
The S&P 500 has soared 23 percent in the last four weeks, but the current bear market rally is misleading. The prospects for a quick recovery are remote at best. The fundamentals are all weak. Corporate profits are down, GDP is negative 6 percent, housing is in a shambles, and the banking system broken. The Fed has increased the money supply by 22 percent, but economic activity is at a standstill. The velocity at which money is spent is the slowest since 1987. Nothing is moving. The banks are hoarding, credit has dried up, and consumers are saving for the first time in 2 decades. The banks' credit-conduit cannot function properly until bad assets are removed from their balance sheets. But the magnitude of the losses make it impossible for the government to purchase them outright without bankrupting the country. According to the Times Online, the IMF has increased its estimates of how much toxic mortgage-backed paper the banks are holding:
"Toxic debts racked up by banks and insurers could spiral to $4 trillion, new forecasts from the International Monetary Fund (IMF) are set to suggest.
The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21. In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia.
Banks and insurers, which so far have owned up to $1.29 trillion in toxic assets, are facing increasing losses as the deepening recession takes a toll, adding to the debts racked up from sub-prime mortgages. The IMF's new forecast, which could be revised again before the end of the month, will come as a blow to governments that have already pumped billions into the banking system."
Since banks lend at a ratio of 10 to 1; the amount of credit cut off to the broader economy will ensure that sluggish growth well into the future. If there is a recovery, it will be weak. The Obama administration will have to increase its capital injections even though they will add to mushrooming deficits. So far, financial institutions have only written down $1 trillion or 25 percent of their losses. This means the banking system is insolvent. Eventually, Obama will have to resolve the bad banks and auction off troubled assets, even though political support is rapidly eroding. According to political analyst F. William Engdahl, most of the garbage assets are concentrated in the nation's five biggest banks:
"Today five US banks according to data in the just-released Federal Office of Comptroller of the Currency’s Quarterly Report on Bank Trading and Derivatives Activity, hold 96% of all US bank derivatives positions in terms of nominal values, and an eye-popping 81% of the total net credit risk exposure in event of default.
The five are, in declining order of importance: JPMorgan Chase which holds a staggering $88 trillion in derivatives (€66 trillion!). Morgan Chase is followed by Bank of America with $38 trillion in derivatives, and Citibank with $32 trillion. Number four in the derivatives sweepstakes is Goldman Sachs with a ‘mere’ $30 trillion in derivatives. Number five, the merged Wells Fargo-Wachovia Bank, drops dramatically in size to $5 trillion. Number six, Britain’s HSBC Bank USA has $3.7 trillion. ("Geithner’s ‘Dirty Little Secret’: The Entire Global Financial System is at Risk", F. William Engdahl, Global Research)
These five banking Goliaths are at the center of political power in America today. Their White House emissary, Timothy Geithner, has concocted a rescue plan--the Public-Private Investment Program--which will provide 94 percent funding from the FDIC for the purchase bad assets. The program is designed to keep asset prices artificially high while transferring the bulk of the losses to the taxpayer. The plan has been widely criticized and has even raised a few eyebrows even among usually-supportive members of the establishment like the Financial Times:
"US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JP Morgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.
The plans proved controversial, with critics charging that the government’s public-private partnership - which provide generous loans to investors - are intended to help banks sell, rather than acquire, troubled securities and loans.
Banks have three options if they want to buy toxic assets: apply to become one of four or five fund managers that will purchase troubled securities; bid for packages of bad loans; or buy into funds set up by others. The government plan does not allow banks to buy their own assets, but there is no ban on the purchase of securities and loans sold by others." (The Financial Times)
It's a multi-billion dollar shell game with myriad opportunities for fraud. In theory, the banks could create their own off-balance sheet operations (SIVs or SPEs) and use them to purchase their own bad assets taking advantage of the government's 94 percent low interest non recourse loans. It's a blatant swindle and another windfall for Wall Street.
Geithner's plan does not fix the problems with the banks, it only delays the final outcome. The next leg-down in the recession will push many of the undercapitalized banks into receivership. Geithner's PPIP won't change that. As housing prices fall and foreclosures rise, the capital position of many of the banks will become untenable leading to a rash of bank failures. An article in Monday's Wall Street Journal puts adds some historical perspective to today's financial crisis:
"The events of the past 10 years have an eerie similarity to the period leading up to the Great Depression. Total mortgage debt outstanding increased from $9.35 billion in 1920 to $29.44 billion in 1929. In 1920, residential mortgage debt was 10.2% of household wealth; by 1929, it was 27.2% of household wealth....
The causes of the Great Depression need more study, but the claims that losses on stock-market speculation and a monetary contraction caused the decline of the banking system both seem inadequate. It appears that both the Great Depression and the current crisis had their origins in excessive consumer debt -- especially mortgage debt -- that was transmitted into the financial sector during a sharp downturn.
Why does one crash cause minimal damage to the financial system, so that the economy can pick itself up quickly, while another crash leaves a devastated financial sector in the wreckage? The hypothesis we propose is that a financial crisis that originates in consumer debt, especially consumer debt concentrated at the low end of the wealth and income distribution, can be transmitted quickly and forcefully into the financial system. It appears that we're witnessing the second great consumer debt crash, the end of a massive consumption binge." (From Bubble to Depression? Steven Gjerstad and Vernon L. Smith, Wall Street Journal)
PARTY LIKE ITS 1929
Two leading economic historians, Barry Eichengreen and Kevin H. Rourke, have written an article "A Tale of Two Depressions" which has been widely circulated on the Internet. It illustrates (with graphs) how the global economy is plummeting faster now than during the 1930s. http://www.voxeu.org/index.php?q=node/3421
By nearly every objective standard, the present downturn is worse than the Great Depression. Manufacturing, industrial production, foreign trade, capital flows, consumer confidence, housing, and even stocks are falling faster today than after the crash of 1929. So far, Bernanke's monetary bandaids have prevented the wholesale collapse of the financial system, but that could change. The economy continues its downhill slide and it looks like there's nothing to stop it from falling further still.
Subscribe to:
Posts (Atom)
