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.
Sunday, April 12, 2009
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.
SC89-8 / http://tpmcafe.talkingpointsmemo.com/2009/04/07/the_disaster_stage_of_us_financialization/
THE DISASTER STAGE OF U.S. FINANCIALIZATION
............Indeed, for all that the 1930s evoke national trauma, that decade was in fact a waiting room for national glory and wellbeing. World War Two ushered in American global ascendancy, the "Happy Days" of the 1950s and an unprecedented middle-class prosperity.
Today's disaster stage of American financialization - the bursting of the huge 25-year, almost $50 trillion debt bubble that helped underwrite the hijacking of the U.S. economy by a rabid financial sector -- won't be nearly so kind. It is already ushering in the reverse: a global realignment in which the United States loses the global economic leadership won in World War Two. The ignominy deserved by Wall Street after 1929-1933 is peanuts compared with the opprobrium the U.S. financial sector and its political and regulatory allies deserve this time.
My 2002 book, Wealth and Democracy, in its section on the "Financialization of America" noted that the "finance, insurance and real estate (FIRE) sector overtook manufacturing during the 1990s, moving ahead in the national income and GDP charts by 1995. By the first years of the next decade, it had taken a clear lead in actual profits. Back in 1960, parenthetically, manufacturing profits had been four times as big, and in 1980, twice as big." Hardly anyone was paying attention. By 2006, the FIRE sector, its components mixed together like linguine by the 1999 repeal of the old New Deal restraints against mergers of commercial banks, investment firms and insurance, had ballooned to 20.6% of U.S. GDP versus just 12% for manufacturing. The FIRE Sector, now calling itself the Financial Services Sector, lopsidedly dominated the private economy. A detailed chart appears on page 31 of Bad Money. Some New York publications and politicians try to insist that finance per se is only 8%, but the post-1999 commingling makes that absurd.
This represented a staggering transformation of the U.S. economy - doubly staggering now because of the crushing burden of its collapse. You would think that that opinion molders and the national media would have been probing its every aperture and orifice. Not at all.
Thus, it was pleasing to read MIT economics professor Simon Johnson's piece in the April Atlantic fingering financial "elites" who captured the government for the latterday financial debacle. This is broadly true, and judging from my e.mail, even some conservatives accept Johnson's analysis and indictment. After the furor over the AIG bonuses, the public and some politicians may be ready to start identifying and blaming culprits. This would be useful. Having an elite to blame is a often prerequisite of serious reform.
Nevertheless, the extremes of financialization, together with the havoc we now know it to have wrought, represent a much more complicated historical and economic genesis, one which U.S. leaders must be obliged to confront if not fully acknowledge. Elite avarice and culpability has multiple and longstanding dimensions. It has been fifteen years since Graef Crystal, a wellknown employment compensation expert, brought out his incendiary In Search of Excess: the Overcompensation of American Executives. The data was blistering. Over the last decade, New York Times reporter David Cay Johnston has published two books - Perfectly Legal and Free Lunch - describing how the U.S. tax code, in particular, has been turned into a feeding trough for the richest one percent of Americans (especially the richest one tenth of one percent).
The backstop to avarice provided by a wealth culture and market mania from the late 1980s through the Clinton years to the George W. Bush administration, prompted another set of indictments that still resonate: William Greider's Secrets of the Temple: How the Federal Reserve Runs The Country (1987), Robert Kuttner's Everything For Sale (1997), Thomas Frank's One Market Under God (2000) and John Gray's False Dawn (1998). More recently, Paul Krugman's books have been equalled or exceeded in timeliness by his New York Times columns blasting the perversity of the Obama-Geithner financial bail-out and the malfeasance of the financial sector. James K. Galbraith, in his 2008 book The Predator State, has elaborated the valid point that too many conservatives over last few decades betrayed their free market rhetoric by supporting a relentless use of state power and government financial bail-outs to advance upper-income and corporate causes. On the other hand, some conservative economists of the Austrian school make related indictments of liberal bail-out penchants.
This could be a powerful framework. All of these critiques have merit, and ideally they might converge as earlier indictments of elite and governmental abuse did during the Progressive and New Deal eras. But I have to return to whether the public will ever be given full information on the fatal magnitude of financialization, who was responsible, and how it failed and crashed in 2007-2009. So far, political and media discussion has been so minimal that the early 21st century American electorate has much less readily available information on what took place than did the electorates of those earlier reform eras.
Towards this end, my initial emphasis in the new material included in the 2009 edition of Bad Money is on what techniques, practices and leverage the financial sector used between the mid-1980s and 2007 to metastasize early-stage financialization into an economic and governmental coup and, ultimately, a national disaster. Perhaps not surprisingly, I found that the principal building blocks that the sector used to enlarge itself from 10-12% of Gross National Product around 1980 to a mind-boggling 20.6% of Gross Domestic Product in 2004 involved essentially the same combination of credit-mongering, massive sector borrowing, highly leveraged speculation, reckless, greedy pioneering of new experimental vehicles and securities (derivatives and securitization) and mega-trillion-dollar abuse of the mortgage and housing markets that became infamous as hallmarks of the 2007-2009 disaster. During Alan Greenspan's 1987-2006 tenure as Federal Reserve Chairman, financial bubble-blowing became a Washington art and total credit market debt in the U.S. quadrupled from $11 trillion to $46 trillion.
To try to put 20-30 pages into a nutshell, the financial sector hyped consumer demand - from teen-ager credit cards to mortgages for the unqualified - to make credit into one of the nation's biggest industries; nearly $15 trillion was borrowed over two decades to leverage de facto gambling at 20:1 and 30:1 ratios; banks, investment firms, mortgage lenders, insurers et al were all merged together to do almost anything they wanted; exotic securities and instruments that even investment chiefs couldn't understand were marketed by the trillions. To achieve fat financial-sector profits, the housing and mortgage markets might as well have been merged with Las Vegas.
The principal inventors, hustlers , borrowers and culprits were the nation's 15-20 largest and best known financial institutions - including the ones that keep making headlines by demanding more bail-out money from Washington and giving huge bonuses. These same institutions got much of the early bail-out money and as of December 2008 they accounted for over half of the bad assets written off. The reason these needed so much money is that the government had let them merge, speculate, expand and experiment on dimensions beyond all logic. That is why the complicit politicians and regulators have to talk about $100 billion here and $1 trillion there even while they pretend that it's all under control and that the run-amok financial sector remains sound.
This is a much grander-scale disaster than anything that happened in 1929-33. Worse, it dwarfs the abuses of debt, finance and financialization that brought down previous leading world economic powers like Britain and Holland (back when New York was New Amsterdam)...........
...........But for the moment, let me underscore: the average American knows little of the dimensions of the financial sector aggrandizement and misbehavior involved.
............Indeed, for all that the 1930s evoke national trauma, that decade was in fact a waiting room for national glory and wellbeing. World War Two ushered in American global ascendancy, the "Happy Days" of the 1950s and an unprecedented middle-class prosperity.
Today's disaster stage of American financialization - the bursting of the huge 25-year, almost $50 trillion debt bubble that helped underwrite the hijacking of the U.S. economy by a rabid financial sector -- won't be nearly so kind. It is already ushering in the reverse: a global realignment in which the United States loses the global economic leadership won in World War Two. The ignominy deserved by Wall Street after 1929-1933 is peanuts compared with the opprobrium the U.S. financial sector and its political and regulatory allies deserve this time.
My 2002 book, Wealth and Democracy, in its section on the "Financialization of America" noted that the "finance, insurance and real estate (FIRE) sector overtook manufacturing during the 1990s, moving ahead in the national income and GDP charts by 1995. By the first years of the next decade, it had taken a clear lead in actual profits. Back in 1960, parenthetically, manufacturing profits had been four times as big, and in 1980, twice as big." Hardly anyone was paying attention. By 2006, the FIRE sector, its components mixed together like linguine by the 1999 repeal of the old New Deal restraints against mergers of commercial banks, investment firms and insurance, had ballooned to 20.6% of U.S. GDP versus just 12% for manufacturing. The FIRE Sector, now calling itself the Financial Services Sector, lopsidedly dominated the private economy. A detailed chart appears on page 31 of Bad Money. Some New York publications and politicians try to insist that finance per se is only 8%, but the post-1999 commingling makes that absurd.
This represented a staggering transformation of the U.S. economy - doubly staggering now because of the crushing burden of its collapse. You would think that that opinion molders and the national media would have been probing its every aperture and orifice. Not at all.
Thus, it was pleasing to read MIT economics professor Simon Johnson's piece in the April Atlantic fingering financial "elites" who captured the government for the latterday financial debacle. This is broadly true, and judging from my e.mail, even some conservatives accept Johnson's analysis and indictment. After the furor over the AIG bonuses, the public and some politicians may be ready to start identifying and blaming culprits. This would be useful. Having an elite to blame is a often prerequisite of serious reform.
Nevertheless, the extremes of financialization, together with the havoc we now know it to have wrought, represent a much more complicated historical and economic genesis, one which U.S. leaders must be obliged to confront if not fully acknowledge. Elite avarice and culpability has multiple and longstanding dimensions. It has been fifteen years since Graef Crystal, a wellknown employment compensation expert, brought out his incendiary In Search of Excess: the Overcompensation of American Executives. The data was blistering. Over the last decade, New York Times reporter David Cay Johnston has published two books - Perfectly Legal and Free Lunch - describing how the U.S. tax code, in particular, has been turned into a feeding trough for the richest one percent of Americans (especially the richest one tenth of one percent).
The backstop to avarice provided by a wealth culture and market mania from the late 1980s through the Clinton years to the George W. Bush administration, prompted another set of indictments that still resonate: William Greider's Secrets of the Temple: How the Federal Reserve Runs The Country (1987), Robert Kuttner's Everything For Sale (1997), Thomas Frank's One Market Under God (2000) and John Gray's False Dawn (1998). More recently, Paul Krugman's books have been equalled or exceeded in timeliness by his New York Times columns blasting the perversity of the Obama-Geithner financial bail-out and the malfeasance of the financial sector. James K. Galbraith, in his 2008 book The Predator State, has elaborated the valid point that too many conservatives over last few decades betrayed their free market rhetoric by supporting a relentless use of state power and government financial bail-outs to advance upper-income and corporate causes. On the other hand, some conservative economists of the Austrian school make related indictments of liberal bail-out penchants.
This could be a powerful framework. All of these critiques have merit, and ideally they might converge as earlier indictments of elite and governmental abuse did during the Progressive and New Deal eras. But I have to return to whether the public will ever be given full information on the fatal magnitude of financialization, who was responsible, and how it failed and crashed in 2007-2009. So far, political and media discussion has been so minimal that the early 21st century American electorate has much less readily available information on what took place than did the electorates of those earlier reform eras.
Towards this end, my initial emphasis in the new material included in the 2009 edition of Bad Money is on what techniques, practices and leverage the financial sector used between the mid-1980s and 2007 to metastasize early-stage financialization into an economic and governmental coup and, ultimately, a national disaster. Perhaps not surprisingly, I found that the principal building blocks that the sector used to enlarge itself from 10-12% of Gross National Product around 1980 to a mind-boggling 20.6% of Gross Domestic Product in 2004 involved essentially the same combination of credit-mongering, massive sector borrowing, highly leveraged speculation, reckless, greedy pioneering of new experimental vehicles and securities (derivatives and securitization) and mega-trillion-dollar abuse of the mortgage and housing markets that became infamous as hallmarks of the 2007-2009 disaster. During Alan Greenspan's 1987-2006 tenure as Federal Reserve Chairman, financial bubble-blowing became a Washington art and total credit market debt in the U.S. quadrupled from $11 trillion to $46 trillion.
To try to put 20-30 pages into a nutshell, the financial sector hyped consumer demand - from teen-ager credit cards to mortgages for the unqualified - to make credit into one of the nation's biggest industries; nearly $15 trillion was borrowed over two decades to leverage de facto gambling at 20:1 and 30:1 ratios; banks, investment firms, mortgage lenders, insurers et al were all merged together to do almost anything they wanted; exotic securities and instruments that even investment chiefs couldn't understand were marketed by the trillions. To achieve fat financial-sector profits, the housing and mortgage markets might as well have been merged with Las Vegas.
The principal inventors, hustlers , borrowers and culprits were the nation's 15-20 largest and best known financial institutions - including the ones that keep making headlines by demanding more bail-out money from Washington and giving huge bonuses. These same institutions got much of the early bail-out money and as of December 2008 they accounted for over half of the bad assets written off. The reason these needed so much money is that the government had let them merge, speculate, expand and experiment on dimensions beyond all logic. That is why the complicit politicians and regulators have to talk about $100 billion here and $1 trillion there even while they pretend that it's all under control and that the run-amok financial sector remains sound.
This is a much grander-scale disaster than anything that happened in 1929-33. Worse, it dwarfs the abuses of debt, finance and financialization that brought down previous leading world economic powers like Britain and Holland (back when New York was New Amsterdam)...........
...........But for the moment, let me underscore: the average American knows little of the dimensions of the financial sector aggrandizement and misbehavior involved.
SC89-7 / http://survivalacres.com/wordpress/
Market Melt
I don’t know what to make of this, other than bad news. The U.S. Treasury is holding secret tests and their results on the nations leading banks.
Some of the tests have already been performed. But they are unwilling to reveal the results yet for fear of a “market melt”.
Here is the article: US to delay bank test results for earnings-source
What the article is saying is an eye-opener if you really read it.
" The U.S. Treasury Department is planning to delay the release of any completed bank stress test results until after the first-quarter earnings season to avoid complicating stock market reaction
The government is testing how the largest banks would fare under more adverse economic conditions than are expected in an attempt to assess the firms’ capital needs.
The tests are designed to determine the depth of banks’ capital holes if conditions deteriorate further. "
This is more secret shenanigans by our government (and the Federal Reserve, most definitely a non-government institution), who has been unwilling to let the people of this nation actually know what the hell is going on and where all this money is vaporizing to.
I see this as just more manipulation and smoke and mirrors bullshit. They don’t want you to know how things really are and they don’t like their test results either and they’re afraid you might actually find out that your money is absolutely worthless.
Rather then “inspiring confidence” (a euphanism to sucker more people into playing this shell game), this may very well backfire, because we certainly do not trust our government to tell us the truth. We’ve been lied and manipulated into this position of equity loss for years and years, and now these rotten bastards are going to help us?
Get your near-worthless money OUT of these failing institutions and into something you actually need. This is not a pitch to sell you anything, just start taking care of yourself and realize that your government is once again, telling you it’s going to “deteriorate further” and they don’t want you to know just how bad it’s going to get.
Update: The West’s Fatal Overdose
The summit participants took the easy way out. Their decision to pump a further $5 trillion (€3.72 trillion) into the collapsing world economy within the foreseeable future, could indeed prove to be a historical turning point — but a turning point downwards. In combating this crisis, the international community is in fact laying the foundation for the next crisis, which will be larger.
I don’t know what to make of this, other than bad news. The U.S. Treasury is holding secret tests and their results on the nations leading banks.
Some of the tests have already been performed. But they are unwilling to reveal the results yet for fear of a “market melt”.
Here is the article: US to delay bank test results for earnings-source
What the article is saying is an eye-opener if you really read it.
" The U.S. Treasury Department is planning to delay the release of any completed bank stress test results until after the first-quarter earnings season to avoid complicating stock market reaction
The government is testing how the largest banks would fare under more adverse economic conditions than are expected in an attempt to assess the firms’ capital needs.
The tests are designed to determine the depth of banks’ capital holes if conditions deteriorate further. "
This is more secret shenanigans by our government (and the Federal Reserve, most definitely a non-government institution), who has been unwilling to let the people of this nation actually know what the hell is going on and where all this money is vaporizing to.
I see this as just more manipulation and smoke and mirrors bullshit. They don’t want you to know how things really are and they don’t like their test results either and they’re afraid you might actually find out that your money is absolutely worthless.
Rather then “inspiring confidence” (a euphanism to sucker more people into playing this shell game), this may very well backfire, because we certainly do not trust our government to tell us the truth. We’ve been lied and manipulated into this position of equity loss for years and years, and now these rotten bastards are going to help us?
Get your near-worthless money OUT of these failing institutions and into something you actually need. This is not a pitch to sell you anything, just start taking care of yourself and realize that your government is once again, telling you it’s going to “deteriorate further” and they don’t want you to know just how bad it’s going to get.
Update: The West’s Fatal Overdose
The summit participants took the easy way out. Their decision to pump a further $5 trillion (€3.72 trillion) into the collapsing world economy within the foreseeable future, could indeed prove to be a historical turning point — but a turning point downwards. In combating this crisis, the international community is in fact laying the foundation for the next crisis, which will be larger.
SC89-6 / http://www.globalresearch.ca/index.php?context=va&aid=13063
Massive Cover-Up of Economic Crisis
“The Entire Strategy Is to Keep People from Getting the Facts”
William K. Black was the senior regulator during the Savings and Loans (S&L) crisis, and an Associate Professor of Economics and Law at the University of Missouri (bio).
Black says that massive fraud is what caused the economic crisis. As one example, he explains that everyone involved knew that the CDOs which packaged subprime loans were not AAA credit-worthy (which means that they are completely risk-free). He also said that the exotic instruments (CDOs, CDS, etc.) which spun the mortgages into more and more abstract investments were intentionally created to defraud investors.
Moreover, Black says that the government's entire strategy in dealing with the economic crisis is a massive cover-up:
[They] don't want to change the bankers, because if we do, if we put honest people in, who didn't cause the problem, their first job would be to find the scope of the problem. And that would destroy the cover up....
Geithner is ... covering up. Just like Paulson did before him....
These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed....
Until you get the facts, it's harder to blow all this up. And, of course, the entire strategy is to keep people from getting the facts....
[Question] Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?
[Black] Absolutely....
They're deliberately leaving in place the people that caused the problem, because they don't want the facts. And this is not new. The Reagan Administration's central priority, at all times, during the Savings and Loan crisis, was covering up the losses.
[Question] So, you're saying that people in power, political power, and financial power, act in concert when their own behinds are in the ringer, right?
That's right. And it's particularly a crisis that brings this out, because then the class of the banker says, "You've got to keep the information away from the public or everything will collapse."
“The Entire Strategy Is to Keep People from Getting the Facts”
William K. Black was the senior regulator during the Savings and Loans (S&L) crisis, and an Associate Professor of Economics and Law at the University of Missouri (bio).
Black says that massive fraud is what caused the economic crisis. As one example, he explains that everyone involved knew that the CDOs which packaged subprime loans were not AAA credit-worthy (which means that they are completely risk-free). He also said that the exotic instruments (CDOs, CDS, etc.) which spun the mortgages into more and more abstract investments were intentionally created to defraud investors.
Moreover, Black says that the government's entire strategy in dealing with the economic crisis is a massive cover-up:
[They] don't want to change the bankers, because if we do, if we put honest people in, who didn't cause the problem, their first job would be to find the scope of the problem. And that would destroy the cover up....
Geithner is ... covering up. Just like Paulson did before him....
These are all people who have failed. Paulson failed, Geithner failed. They were all promoted because they failed....
Until you get the facts, it's harder to blow all this up. And, of course, the entire strategy is to keep people from getting the facts....
[Question] Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?
[Black] Absolutely....
They're deliberately leaving in place the people that caused the problem, because they don't want the facts. And this is not new. The Reagan Administration's central priority, at all times, during the Savings and Loan crisis, was covering up the losses.
[Question] So, you're saying that people in power, political power, and financial power, act in concert when their own behinds are in the ringer, right?
That's right. And it's particularly a crisis that brings this out, because then the class of the banker says, "You've got to keep the information away from the public or everything will collapse."
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