ACTIVISM: WI firefighters Union action v. M & I bank.

I have been following the actions in WI.
An interesting thing has developed. M&I bank was a major contributor
to Governor Walker.
This bank has been on boycott Walker lists for weeks. Somehow in the
last day and a half this thing got legs.
People started telling other people to pull their money out of M&I and
to protest the banks over their donations to Walker.
A tweet came across last night about 10pm for people to show up at M&I
tomorrow morning (this morning) and withdraw their money.
The firefighters union was there at 9am at the downtown Madison branch
and took out their $180,000. Lots of people followed suit and there
was a large crowd with signs out front most of the morning from what
accounts I saw.
Word is now from multiple sources that M&I in Madison closed for the day.

They were doing this for reasons other than UnCut's specific purpose
but this is just awesome to see. People being fed up with something
and taking action.
It didn't take that many people to do this and it was concentrated in
Madison at least as far as a big crowd. No reports yet how many people
went into other branches
in the region to close accounts.

Banks and big businesses try to poo poo boycotts and protests and a
few disgruntled people and that they don't matter. But they do and it
doesn't take huge numbers to do it.
Companies being hit with WI boycotts are in a panic, issuing press
releases and trying to deny culpability for their political donations.
Companies don't do that unless they are in fear.
These are WI companies that have national exposure but this is only
from people aware of the WI goings on. Again, not the total
demographic of the US jumping on it.

Koch Industries has been in damage control mode for weeks as boycotts
of their consumer products made rounds and started to be hinted at in
mainstream media. If a company that big is in fear of grassroots
boycotts they do matter. Last week Georgia Pacific products were on
sale just about everywhere I looked.

So what does this have to do with Uncut? Look at the big change a few
people made. Small groups of angry people made companies react.

I think the in masse closing of accounts at B of A could be a great
tactic if there is a way to get enough current customers on board to
do it.

Nancy in SD

Interview With Rogue Trader Jerome BKerviel - 'I Was Merely A Small Cog In The Machine'

Background: Jerome Kerviel has been called the biggest gambler of all time. The 33-year-old Frenchman established positions worth up to €50 billion in bets on the development of the German stock market. At first, he earned billions in profits for his employer, Societe Generale, but then he began losing and became a symbol of the financial crisis. At the beginning of October, he was sentenced to five years in jail, two of them suspended. He was also ordered to pay damages of €4.9 billion. The judge ruled that he had fraudulently manipulated his computer and concealed his trades from his colleagues with offsetting transactions. Kerviel has appealed. He claims to only have used methods that he learned as an employee of Societe Generale.

The fall of Societe Generale trader Jerome Kerviel became symbolic of the entire financial crisis. In October, he was sentenced to five years in jail for losing almost 5 billion euros of his employer's money. In an interview with SPIEGEL, he says his bank knew exactly what he was doing and that his trades were nothing unusual.

SPIEGEL: Monsieur Kerviel, in early October, a Paris court sentenced you to five years in prison, with two suspended, and ordered you to pay €4.9 billion ($6.7 billion) in restitution to Societe Generale, the French bank and trading house where you worked from 2000 to 2008. How did you react to the sentence?

Jerome Kerviel: I see it as a major injustice. It felt like someone had repeatedly whacked me over the head with a bludgeon -- at first with the five years of imprisonment, and then with the multi-billion euro fine. And the bank has been cleared of all complicity.

SPIEGEL: At your current salary of €2,300, you would have to work over 177,000 years just to pay the fine.

Kerviel: The judge simply adopted the line of reasoning used by the lawyers of my former employer, Societe Generale. This judgment doesn't factor in any of the mitigating circumstances that we presented during the trial. People obviously were trying to protect the bank and the financial community in Paris. And, to do so, Jerome Kerviel had to be "shot down."

SPIEGEL: The Paris daily Le Figaro described you in the courtroom as follows: "A lonely man takes deep breaths, sitting groggily with hanging head." Were you really that surprised by the court's decision?

Kerviel: It pulled my legs right out from under me, it was so unexpected. At first, I was paralyzed. More than anything, I was anxious on my mother's behalf that I would have to go straight to prison. The whole affair has been very upsetting for her. I don't understand the verdict; it negates the financial crisis and rests the blame on me alone. We presented the court with evidence that many traders had been doing things in a way similar to how I did them and that my bosses knew what was going on. And then the bank is cleared of all complicity...

SPIEGEL: The court, however, didn't buy your defense. Your fine is the same amount that your employer says it lost in unwinding the open, unauthorized positions on your trading book in a three-day sell-off in January 2008, when markets were plummeting worldwide. Never before has a bank employee caused so much damage by betting on stock prices.

Kerviel: In the process, I didn't make a penny, I didn't enrich myself personally and I didn't commit any fraud. I only wanted to be a good employee who generated as much profit as possible for his employer. I was merely a small cog in the machine -- and now I'm suddenly supposedly the main person responsible for the financial crisis.

SPIEGEL: In 2005, you were promoted to a position as a junior trader and quickly began to distinguish yourself. How did you accomplish that?

Kerviel: I specialized in German stocks. After a few months, I took my first position, on Allianz stock, betting on a fall in the market. At first, I was in the red. But, then, the attacks on London's subways caused stock prices to collapse. The bank reaped €500,000 in profits from my transaction.

SPIEGEL: How did your superiors react?

Kerviel: When I spoke with my supervisor about the deal over lunch, there was a bit of a scolding: As a trader with only six months on the job, I wasn't supposed to take those kinds of positions. Still, right after that, he praised me and increased my freedom to make speculative deals from €2 million to €5 million. That is typical for the contradictory world of the trading room: Risk limits were exceeded on a daily basis. The bosses knew that, but there were never any admonishments.

SPIEGEL: But even with €2 million or €5 million to gamble with, you still weren't satisfied for long.

Kerviel: I continued to raise my stake higher and higher after noticing that my superiors would cover up for me out of their own self-interest and for the benefit of the bank. In late 2006, I established a major short position on the DAX, Germany's stock index, worth several billion euros, which I sold off for a €20 million profit in February 2007. Since the transaction with the Allianz stocks, none of my superiors had taken me to task again. I was making consistently large profits. Within three years, my bosses had raised my targets by 1,700 percent. That shows that they knew exactly what was going on.

SPIEGEL: And then you had delusions of grandeur and began gambling with billions.

Video of IndyMac Bank run confrontation in California

Wednesday, July 16. 2008

Video: IndyMac Bank Run Confrontation in California

KTLA

Posted by

Harold

in Economics at 12:25 |

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Banking Dossier, Small Banks' Reckoning Day Is Coming

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Small Banks' Reckoning Day Is Coming

Billions in Troubled Construction Loans
Promise to Pose Test for Regional Lenders

By MICHAEL CORKERY, JENNIFER S. FORSYTH and LINGLING WEI
July 2, 2008; Page C1

Wall Street is bracing for regional and small banks to fess up to large losses from their mounting volume of soured construction loans made primarily to home builders.

According to the Federal Deposit Insurance Corp., $45.4 billion of the $631.8 billion in construction loans outstanding at the end of the first quarter were delinquent. When banks announce second-quarter results in coming weeks, they are expected to report sharp increases in loans that builders can't repay. Banks are also facing intensifying pressure from federal and state regulators to deal with the problem loans on their books.

WHICH BANKS WILL FEEL THE PAIN?

See a sortable list¹ of small and regional banks with sizable exposure to construction and land loans and with notable delinquency rates.

That will put additional pressure on an already stressed financial system. Banks have begun to dump bad construction and land loans at discounts, curtail new lending and halt construction projects that are under way to preserve capital. Some analysts even see a wave of bank failures as a possibility.

"Across the industry, the second quarter is going to be a tough quarter," says Keith Maio, chief executive of the National Bank of Arizona, a unit of Zions Bancorp, which lent heavily to home builders and developers. "It's going to continue to be tough until the real-estate market hits a bottom."

Scores of banks were already suffering headaches by the end of the first quarter, according to a review by The Wall Street Journal of FDIC-filed reports by 6,919 banks that make construction loans. The smallest banks, those with total assets of less than $5 billion, faced the biggest problems. The WSJ analysis didn't include savings-and-loan institutions, or so-called thrift banks.

Nearly one in three of the banks analyzed -- or 2,182 -- had construction-loan portfolios that exceeded 100% of their total risk-based capital, a red flag to regulators, although it doesn't mean the bank is in danger of failing. Risk-based capital is a cushion that banks can dig into to cover losses.

Even more alarming, 73 of those banks had construction-loan delinquency rates of more than 25%. Executives at all of the banks that responded to questions acknowledged the problems but expressed confidence they had the capital to weather the storm.

At Bremerton, Wash.-based Westsound Bank, new Chief Executive Terry Peterson agreed that his bank became "much, much too concentrated" in construction loans. About 43% of Westsound Bank's construction and land loans in the first quarter were delinquent.

Mr. Peterson was appointed CEO recently to clean up the troubled bank, after regulators issued a "cease and desist" order in March requiring the bank to change lending practices. "We are pretty much using all of our human capital to address our loan problems," he says.

Larger regional banks also face mounting construction-loan problems, but are in decent shape. Thirty-eight of them had more than 100% of their total risk-based capital in construction loans at the end of the first quarter, but only nine of those faced delinquency rates of more than 10%.

Over the next few quarters, banks are expected to begin recording much larger losses. In 2007 and the first quarter of this year, U.S. banks wrote down just 0.7% of their residential construction and land assets as bad debt, according to Zelman & Associates, a research firm. Over the next five years that figure could rise to 10% and 26%, which would amount to about $65 billion to $165 billion, Zelman projects.

During the housing boom, many small and regional banks doubled down on construction loans because they were largely shut out of the home mortgage market dominated by large originators. But now the banks' difficulties are threatening to sharply shrink the home-building industry. Credit Suisse analyst Dan Oppenheim estimates that as many as 50% of the closely held builders won't survive because of the tightening lending environment and housing downturn.

Strategies for coping with the problem loans vary widely. Large banks, such as IndyMac Bancorp Inc. and KeyBank, have been trying to sell billions of dollars of construction and land loans. IndyMac said in a filing Monday that it is working with regulators to shore up its capital. (See related article².)

"The banks are running as fast as they can to get out of housing," says Tom McCormick, president of Astoria Homes, a large, closely held builder in Las Vegas.

Mr. McCormick is involved in a fight with KeyBank, which recently initiated foreclosure proceedings on a $24 million construction loan financing a Las Vegas housing project. Mr. McCormick says the bank took that action even though his company was current on debt payments. In court documents, KeyBank says the builder fell behind.

Mr. McCormick says he found investors to buy out his loans at 70 cents on the dollar, but the bank refused. He also says that KeyBank has prevented him from closing home sales. "I personally think the fact that you would punish any innocent home buyer...is shameful," Mr. McCormick wrote in an email to KeyBank executives. A spokeswoman for KeyCorp, KeyBank's parent, declined to comment.

Many smaller banks have been more willing to work with struggling builders rather than foreclose on their projects. But these banks are coming under pressure from regulators to more aggressively write down their loans, amid declining real-estate values. This process could force many more loans into default.

Some community banks are bristling under the regulatory pressure. "The federal government is being too reactionary," says Damian Kassab, chief executive of Michigan-based Warren Bank, which reported that 47% of its construction loans are delinquent. "They want to see it done as quickly as possible. I say 'can't we just relax, take a deep breath and work with the borrowers.'"

Analysts question whether some small banks are putting off foreclosures because they lack adequate capital to absorb the large losses.

Banks seeking a quick fix by selling off their troubled loans may find fewer buyers. Laurence Pelosi, an executive director of Morgan Stanley Real Estate, a major land investor, told the Pacific Coast Builders Conference last week that the appetite for distressed residential real estate may be waning among some investors. "The complexity of the business and the increasing opportunities in the commercial sector may lead to a shift away from residential," Mr. Pelosi says. "That will have a further impact on values."

--Tom McGinty contributed to this article.

Write to Michael Corkery at michael.corkery@wsj.com³, Jennifer S. Forsyth at jennifer.forsyth@wsj.com⁴ and Lingling Wei at lingling.wei@dowjones.com

Chycho> Economic events of the last 7 years, to WWIII,

chycho.com

7 of the Most Important Economic Events of the Last 7 Years: Collapsing the Economy in the Buildup to World War III

Since the year 2000, the following seven events have either caused or been the symptom of the present economic crises:

1. Year 2000: Iraq dumps the US dollar and switches to the Euro - The following article,"The Real Reasons for the Upcoming War With Iraq", which was written before the US invasion of Iraq, lays forth an argument that the war in Iraq was not just about oil but about the currency in which oil is traded. It is mandatory reading for anyone who wants to understand the basic concepts of American foreign policy, economics, and its military operations around the world. This article states that the principle reason why the United States invaded Iraq was because Saddam Hussein in the year 2000 went "ahead with its plans to stop using the U.S. dollar in its oil business" and start using the Euro.
   Iraq switching from the US Petro-dollar to the Euro meant that countries would no longer be obligated to buy oil in US dollars, so they would no longer have to maintain their US dollar reserves.
2. Since reaching a double top in the year 2001/02, the US dollar has been devalued approximately 35%.
   
   click to enlarge
   source
   Even though Iraq dumping the US currency is no longer an issue because the United States is now occupying Iraq, many countries continue to sell the dollar, converting their reserves to other currencies. Some of these countries include: Sweden, Cuba, U.A.E., China, Russia, India, Indonesia, North Korea, Venezuela, and many more. If the tipping point has been reached, it would explain the dollars dramatic devaluation.
3. Year 2005: Rewriting the U.S. Bankruptcy Law - After years of lobbying, the “dream bill for credit card and financial service companies” finally came into effect in the United States. Two years ago the financial institutions that were preparing for the coming crash were able to lobby Congress to pass the ‘Bankruptcy Bill’. This law that took effect in 2005 created what is now widely refereed to as Debt Slavery and is “the biggest rewrite of U.S. bankruptcy law in a quarter century”.
   The Bill was conveniently introduced at a time when US household debt was at an all time high.
   
   click to enlarge
   source
   Those who were wise enough to realize what the implications of the Bill would be declared bankruptcy before it took effect. Those unfortunates to have been caught unaware are now just realizing that corporations, who’s debts are wiped clean when they declare bankruptcy, have more rights then they do. Unfortunately, since personal bankruptcies have been surging, many people are finding out about their slave status the hard way.
4. Year 2006: Discontinuance of M3 - “On March 23, 2006, the Board of Governors of the Federal Reserve System” ceased publishing the M3 monetary aggregate. The M numbers (M1, M2, and M3) are “components of the United States money supply”, which “show the amount of dollars in circulation”.
   
   click to enlarge
   source
   “M1 is the most volatile, equivalent to cash on the loose. M2 is less volatile, equivalent to savings account deposits. M3 is least volatile, equivalent to Rich Folks Money which they park.” One of the most important things that the M numbers are used for is to measure inflation. Clearly, the data indicates that “there has been substantial money growth since 2000”.
   If there is more money in circulation then it becomes devalued. The downside of devaluing a currency is that it can cause inflation and force the government to increase interest rates, but there are positive effects.
   As the Federal Reserve states, “A key effect of devaluation is that it makes the domestic currency cheaper relative to other currencies. There are two implications of a devaluation. First, devaluation makes the country's exports relatively less expensive for foreigners. Second, the devaluation makes foreign products relatively more expensive for domestic consumers, thus discouraging imports. This may help to increase the country's exports and decrease imports, and may therefore help to reduce the current account deficit.”
   However, not knowing how much money the Banks are printing means that there is no longer an accurate indication of how much currency is in circulation. This basically means that we are playing Monopoly with people who can take money out of the bank anytime they want, because they are the bank. This should be raising alarm bells across the United States the way it has done across the world, as the dumping of the US dollar by most countries indicates. After all, why would anyone want to hold on to a currency that has lost more than 67 percent in five-years relative to its peers?
5. Year 2006: Iran moves from US dollars to the Euro - At the end of 2006 Iran announced that they would “use the euro instead of the US dollar in the country's budget for the next Iranian year”. This announcement is at least an order of magnitude more significant than Saddam Hussein saying that Iraq would start selling oil in Euros.
   If the United States was willing to invade Iraq to prevent oil from being traded in any other currency then the dollar, then it would be logical to assume that they will also confront Iran regarding their plans to permanently and absolutely phase out the US dollar. The United States now finds itself between a rock and a hard place, because they will either need to invade, bomb, or enforce sanctions against Iran along with any other country that decides to stop using US dollars in their oil exports, or they will have to watch the complete collapse of their economy and the devaluing of the Federal Reserve currency known as the US dollar.
   
   click to enlarge
   source
   Where this will lead is yet to be determined but we now know that the United States is willing to sacrifice hundreds of thousands of lives, both American and foreign, and is willing to execute the leaders of sovereign countries to prevent them from switching from US dollars to the Euro.
6. Year 2006/07: Subprime Market Collapses - “Subprime lending , also called B-paper, near-prime, or second chance lending, is the practice of making loans to borrowers who do not qualify for the best market interest rates because of their deficient credit history. The term also refers to paper taken on property that cannot be sold on the primary market, including loans on certain types of investment properties and certain types of self-employed individuals. Subprime lending is risky for both lenders and borrowers due to the combination of high interest rates, poor credit history, and adverse financial situations usually associated with subprime applicants.”
   In the US the competition between these lenders became so fierce that “when the rates were getting too low, they switched to competing by way of advance ratio versus selling price.”
   “In other words, if lender ‘A’ was offering 90% financing, lender ‘B’ would go to 100% financing, then lender ‘C’ would advance 100% of selling price plus costs, then to 105%, etc. We have seen the U.S. equity lenders now go to 130% of selling price, giving back 10-15% to the purchasers to help buy furniture, large electronic products, groceries, while the remaining 15-20% was eaten up in fees.”
   Why would a lender risk giving someone 130% of the value of a property, especially if the people are considered to be high risk? Fractional-reserve banking of course: A system that has been established to allow financial institutions to “loan their customers many times the sum of the credit reserves than they hold”. It’s a pyramid scheme in which everything continues to work until the bottom falls out, and the bottom has fallen out in the United States where “States have subprime exposure between 18% to 30%” and early payment defaults are rising. This problem with the subprime mortgage market is intensifying with the US and UK housing market crashes.
   The following animated documentary contains further information on our present monetary system, and is a great introduction to fractional reserve banking: Money As Debt (47:07)
   With this kind of banking system where money is created from debt, is it any wonder that the International Monetary Fund is warning that “house prices in the UK are overpriced by as much as 40 per cent and the bubble might burst” in Britain as well as several other European markets as it has in the United States.
7. Year 2007: Run on The Bank in the UK - “A bank run is a type of financial crisis. It is a panic which occurs when a large number of customers of a bank fear it is insolvent and withdraw their deposits,” and this is exactly what happened in Britain, the financial capital of the world, in September of this year.
   “The queues that formed outside Northern Rock, the country's fifth-biggest mortgage lender, represented the first bank run in Britain since 1866. The panic was prompted by the very announcement designed to prevent it. Only when the Bank of England said that it would stand by the stricken Northern Rock did depositors start to run for the exit. Attempts by Alistair Darling, the chancellor of the exchequer, to reassure savers served only to lengthen the queues of people outside branches demanding their money. The run did not stop until Mr Darling gave a taxpayer-backed guarantee on September 17th that, for the time being, all the existing deposits at Northern Rock were safe.”
   This banking crisis is not an anomaly that just became realized in the UK. Banks in the rest of Europe are also facing a crisis and all indications are that this “Force 5 economic-hurricane that just touched ground in Great Britain is headed for America and gaining strength on the way.”
   The following documentary is worth viewing to fully understand the causes and implications of what is taking place: ZEITGEIST, The Movie: Part 3 of 3 (47:05)
   
   
   

   
   
   
8. Year 2007: 52% Support U.S. Military Strike Against Iran - In the most recent Zogby Poll released October 29, the “majority of likely voters – 52% – would support a U.S. military strike to prevent Iran from building a nuclear weapon, and 53% believe it is likely that the U.S. will be involved in a military strike against Iran before the next presidential election.”
   Why would an attack on Iran be considered an economic event? Because war is the perfect consuming machine and a racket. “It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives.” (Major General Smedley D. Butler, USMC)
   The US economy was on the verge of collapse before 911 and again before the invasion of Iraq, but it was saved thanks in large part to the wars. “What do the wars in Iraq and Afghanistan and the economic recovery in the United States have in common? More than one might expect, to judge from the last couple of rounds of US growth figures (2004).”
   How much did the Iraq war contribute to boasting the economy? “During the second quarter of 2003, when the war in Iraq was in full swing, some 60 per cent of the 3.3 per cent GDP growth rate was attributable to military spending.”
   “The war has been a large part of the justification for the Bush administration to run ever-widening budget deficits, and those deficits, predicated largely on military spending, have in turn pumped money into the economy and provided the stimulus that low interest rates and tax cuts, on their own, could never achieve.”
   This however has run its course and the American economy has taken a serious downturn. As it is the case with delaying the inevitable, the present economic crisis is much graver than it was pre-Iraq, hence a bigger intervention is required to rejuvenate the American economy with its cannibalistic corporate structure.
   Thanks to these wars, US debt is at historic levels, $9 trillion and counting, and all indications are that it is going to go a lot higher.
   
   click to enlarge
   source
   So what is this ever-widening budget deficits mean? The above chart is a “projection of the US budget” for the near future. “These are the US government’s own projections—and we all know they have every incentive to accent the positive. If this is the best they can do at this point, then you know things are not just bad, they are calamitous.
   “This glimpse at the future clearly shows that the debt of the US will, in the foreseeable future, go from being a troubling yet manageable fraction of the economy to being several times the size of economy. That can’t happen without serious repercussions.
   “The US government will be spending money they don’t have, which means creating more of it out of thin air and diluting the value of all the dollars that came before. It doesn’t take a Harvard MBA to know that the kind of deficits projected above guarantee a persistently weak dollar, higher inflation and higher interest rates going forward.”
   So how does a collapsing empire as large as the United States recover from such disastrous fiscal policy? If history is any indication, a World War is the only solution. “The Great Depression ended as nations increased their production of war materials at the start of World War II. This increased production provided jobs and put large amounts of money back into circulation.” Hence in large part, WWII helped to bring about the end of the great depression.
   Unfortunately however it was not the general public that benefited from the war. “World War II spending often required a conversion of plants designed for civilian good production into military factories and back again over the 9 year period. Substantially higher federal tax rates that were paid by the majority of households imposed much stronger fiscal drags on the benefits of the spending. Finally, less of the military spending was earmarked for wages and use of locally produced inputs, which reduced the direct stimulus to the local economy.” In essence, World War II just helped to consolidate corporate assets for the privileged few.
   This attack on Iran will be nothing short of World War III which happens to be the mantra of the neocons who, with their corporate connections, would have everything to gain while the human race would have everything to lose, specially considering that this global war to save the American Empire is about to begin with the use of Nuclear weapons.
   Unwittingly, the American populace is beginning to support the Bush administration’s plans to attack Iran, but they fail to realize that the decision to start World War III is solely an economic one to prevent the banking institutions from collapsing.

So what are the implications of all this?

In a recent lecture, Seymour Hersh, an American Pulitzer Prize winning investigative journalist, stated that he feared what would happen if American citizens began to believe the propaganda from the Bush administration now that the rhetoric to attack Iran has changed from preventing Iran from acquiring nuclear weapons to stopping them from killing American troops in Iraq. He states that this change in tactics by the US administration seems to be working and Americans are starting to support an attack on Iran. As the Zogby Poll indicates, Hersh’s fears are becoming realized.

The US economy is showing signs that it is in a recession and heading for a hard landing, due in large part to the subprime crisis and the inevitable end to fractional reserve banking. Unfortunately economists believe that the short term solution to saving the banking theocracies from completely collapsing, with a crisis of this magnitude, is to wage war. However this strategy has the reverse effect, and completely collapses an economy if the war drags on by mushrooming the national debt and depleting the resources of the warring nations. This kind of economic lifeline has two major consequences: First it devastates the populace and the environment, and second it consolidates assets for the elite.

There is also one major setback to this proposal of a war with Iran: An attack on Iran would be nothing less then World War III. But then again maybe that is what the US economy needs to stay alive, a World War: The Perfect Consuming Machine. After all it was World War II that decisively ended the great depression, and since most economic indicators are worst now then they were then, it would be reasonable to assume that the United States will start World War III for nothing else then to continue the American lifestyle, maintain the banking plutocracy, and consolidate world assets into the corporate coffer.

If World War III, the minimum expected death toll for which is 200 million, is allowed to take place to save the banking institutions from collapse, then it is a true sign of corporate economic intelligence and control, however this well not resonate well with humanity, but then again, corporations are anything but human and war is everything but humane.

Posted in Economics | Politics Submitted by chycho on Sat, 2007-11-10 23:10.

Update: March 15, 2008

CARACAS (AFP) - “Venezuelan state oil giant PDVSA has decided to sign some oil contracts in euros in the face of a plummeting dollar, local media reported, citing officials.”

chycho | Sat, 2008-03-15 22:21

Bank run in the US

Unsure about the future of home-loan giant Countrywide, bank customers line up to withdraw their money.

chycho | Sat, 2008-03-01 12:55

this morning's great urls .. 6 feb 2008 great snips

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/03/IN8LUO095.DTL

STIMULUS PLAN A SCAM TO BENEFIT THE RICH,

Higher loan limits will lead to Fannie Mae, Freddie Mac bailout

Annie's letters: America’s whoredom season By Khalid Amayreh in ...

America’s whoredom season. By Khalid Amayreh in Occupied East Jerusalem. 5 February, 2008. “And the governor said, Why, what evil that man (Jesus) has done? ...
annies-letters.blogspot.com/2008/02/americas-whoredom-season-by-khalid.html - 4 hours ago - Similar pages - Note this

Tuesday, February 5, 2008 Geostrategy-Direct.com

Cheney: Eavesdrop because terrorists don't fight by the rules of international law

Vice President Dick Cheney said last month that the terrorist threat to the United States remains a real danger and so U.S. intelligence agencies need strong authority to conduct electronic eavesdropping and other intelligence-gathering activities.

“The terrorists waging war against this country don't fight according to the rules of warfare or international law or moral standards or basic humanity, and we have to be clear-eyed about the character and objective of these adversaries,” Cheney said in remarks at the Heritage Foundation on Jan. 23.

“They have a strategic goal to create the old 7th century caliphate, an empire stretching from Europe through the Middle East all the way around to Southeast Asia. They want to arm themselves with chemical, biological and nuclear weapons, and they would not hesitate to use such weapons.”

Banks lose billions

Published on Wednesday, February 06, 2008.

Source: International Forecaster

Banks losing billions, and replace it with more money, Citigroup and Lynch holding lion share of market risk, local services slashed, Yahoo! bounces back from layoffs by buyout notice

Banks are losing hundreds of billions of dollars and those in the banking industry tell us only losing $1 billion is considered a good news event these days. This is the kind of sociopathic insanity we have to listen to these days. Then their answer is to give us more money to throw at the problem and we will solve it. They are lying and they simply can't help themselves. They get totally divorced from reality. They are in total denial. We are also told that the infusion of capital from foreign institutions into the banking system to cover up their mistakes is a sign of strength. That is mindless. All the foreigners are doing is dumping dollars, which are the wages of de-industrialization, deregulation, free trade, globalization, offshoring and outsourcing. Better known as the termination of your livelihood. It has made us dependent on capital from the outside world. We have become junk-bond junkies. We are no longer the most productive nation in the world. We have been converted into sniveling, pathetic debtors who have been betrayed by our large transnational conglomerates.

Colleges and universities are concerned about the state of their financial aid programs. Sallie Mae does not deny it has problems, yet its CEO Albert Lord sold 1.2 million of his shares.

Private loans are available but they have variable interest rates that allow for higher rates.

Concerned about amounts of pension money that are being moved to outside managers and into opaque investments such as private equity, two trustees of the Texas teacher retirement system board, want to curb political contributions from investors, who do business with the fund. These trustees, who are both school superintendents and the only educators on the nine-member board, said that the $115 billion fund needs to disclose more information about the firm's it hires to invest its money and how they got the job.

Besides limits on campaign contributions the board will also consider whether the fund should publicly disclose placement fees and other payments made in connection with hiring money managers.

Texas has become only the fourth state with a pension fund that limits campaign contributions. Others are California, New Jersey and Connecticut. They should all do so.

Sometimes with financial dislocation comes tragedy. A high-ranking executive of a collapse subprime lender killed his wife and then jumped off a bridge in New Jersey.

Junk bonds are off to their worst start since 1990, falling 1.8% in January triggering $17 billion in losses.

In case you missed it at the State of the Union address by our president he said, "and tonight I am pleased to announce that, in April, we will host this year's North American Summit of Canada, Mexico and the United States in the great city of New Orleans." You'll get the same message from McCain and Clinton. Only Ron Paul can give us the kind of government we need.

A quarterly survey from Financial Executives International and Baruch College showed its optimism index sinking 6.6 points. CFOs have steadily for three years been expressing less confidence about the economy. They have seen recession coming. Of the 361 polled, 73% were concerned about the recession over the next year. 46% said a weaker dollar would have a negative impact on their business and 26% said it would have a positive impact.

Mortgage applications jumped to a four-year high as activity rose 75%. Remember the average applicant is submitting three applications, so the numbers are misleading.

Refi applications rose 22.1%, the highest since July of 2003, but the application index fell 17.7%. Refi's were 73% of all applications up from 66%. The 30-year fixed rate mortgage rose 11 basis points to 5.6%.

Banks may have to post additional write-downs of $70 billion or more as credit ratings for bonds are further downgraded.

Citigroup and Merrill Lynch hold 45% of the entire market risk. The fate of mono-line insurers is of paramount importance to financial stocks. If MBIA follows Ambac to double A, the game is over. Such an event could take the Dow to 9,000.

Merrill Lynch will no longer underwrite collateralized debt obligations.

Morgan Stanley wrote down $169 million after helping its money market funds by taking on bonds issued by their SIV's. They bought $1.06 billion in SIV's including $160 million since December the first.

Goldman Sachs, Morgan Stanley and Bear Stearns are under investigation by the SEC and the FBI, as well as the states of New York and Connecticut in the default of mortgage-backed bonds. The largest banks and securities firms have posted more than $133 billion in credit losses due to subprime loans. The FBI is pursuing violation of subprime lenders, housing developers and Wall Street banks that packaged loans as securities. They are also looking for criminal activity and insider trading.

Cities, towns, counties and states are slashing municipal services past the point of pain. They are cutting police patrols, laying off teachers and slashing municipal services. It's either do that or go into savings and that usually only lasts a year and the savings are gone. Even the more affluent communities are starting to show signs of strain. Spending by states has fallen precipitously forcing communities to rely more on property tax revenues, or use savings or services. The loss in revenue and inflation are killing these entities. Wait until they have to cut real estate taxes due to falling values. That is when the real problems will begin.

Houghton Mifflin Harcourt Publishing is going to expand layoffs as a result of the recent $4 billion acquisition of Harcourt Education.

A rumor is bouncing around Wall Street, the City of London and in Paris and on Kaiserstrasse in Frankfurt that J.P. Morgan Chase has a $4 billion loss on a derivatives trade coming soon.

Yahoo is preparing to lay off 1000 workers in Sunnyvale, California the largest purge since the dot-com bust seven years ago. Yahoo reported a 23% drop in fourth-quarter earnings.

Yahoo shares then rose 45% when Microsoft offered to buy it.

The Conference Board said the December help-wanted index was 22 versus 21 month on month

Letter Re: A Federal Reserve Balance Sheet Disaster

Dear Jim,
I just read on a[nother] blog about an imminent Federal Reserve disaster.

There's no [mainstream] news coverage on it yet so this qualifies as a serious heads up.

Note the second numeric column. $40 Billion, has been since 1913, by law. Then notice it suddenly drops to $198 million and then two days ago the report lists the banks as minus $8.7 Billion, something which has never happened before.

How bad is it? Think Weimar Republic. The Fed can no longer stop inflation because the banks can't secure new money with debt. People aren't buying debt anymore. Ergo, hyperinflation is the natural consequence. Mark this day on your calendar. Best, - InyoKern

JWR Replies: In case you missed it, I mentioned the following in Friday's Odds 'n Sods: Hawaiian K. pointed out this Federal Reserve chart, showing that the Net Free or Borrowed Reserves (NFORBRES) of Depository Institutions just fell off a cliff. Let's pray that there aren't any bank runs soon, because the till is empty. It is a jolly good thing that the Fed is handing out so much cheap money these days, so the member banks can list part of these funds as "reserves."

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Letter Re: Question on Body Armor "Expiration" Dates

Dear Jim:
There is an "urban myth" that Body Armor "expires" after the official manufacturer warranty runs out. Actually, the standard five year warranty is simply based on the insurance companies legal need to limit their liability - not on the actual performance of armor. (I have a sneaking suspicion that manufacturers don't complain too much about being able to sell new Body Armor every five years either!)

The National Institute of Justice (NIJ) has found that 10 year old used armor tests as good as new. Since we deal with a lot of Police Surplus we run tests on the oldest and worst looking vests we see (vests we would never sell because they are over 25 years old, on the old NIJ 0101.02 standard). Oddly enough, these old and beat-up vests always stop 9mm +P FMJ and .357 Magnum +P JSP for us.
Here is a direct link to data and photos.

Of course decertified Zylon vests are not to be trusted - regardless of age. However, good Body Armor lasts much, much longer than the five year warranty/insurance policy.
Thanks, - Nick Taylor, BulletProofME.com Body Armor

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http://www.urbansurvival.com/c2csnotes20080102.pdf

2007 into 2008
• Linguistically 2007 was the “Year of
emergence” where we see macro trends
forming
• 2008 is “Year of manifestation” and it will be
“ruled” to use the astrological context by two
memes (thought viruses) “Secrets Revealed”
and “Economic Collapse”

George Ure's presentation on coast to coast .. highly recommended

Finance portfolio: The profit$ of doom

Hey Buddy, Can You Spare $1,000 Trillion?

I write each editorial under the impression that a major event is going to prevent me from drafting the next one. My fear almost came true. This one was scheduled to be released early October then delayed due to an avalanche of scary news unseen before in my lifetime. The threat of 'monetary terrorism' has only one remedy called 'financial detoxification'. However, thanks for taking the time to read this column, which could have easily been much longer. As you will see, nobody can stop this freight train.

The story of the upcoming world crash is hidden in plain sight. Even mayor Bloomberg has jumped in the gloom and doom bandwagon: a global economic downturn was looming, triggered by the "lunacy" of public debt, he declared last month. Meanwhile denial continues. Although nearly 70% of the Americans do fear a recession, the possibility of a major crisis is not considered. A crisis? Not in my backyard, most of them think. It all boils down to faith. To be fair, the 'empire mentality' was born with history. Eventually people wake up to the harsh reality that the empire lied to them. The only successful government programs are wars and economic crises. When two or three decades of prosperity end with a crash and geopolitical crisis, what does this mean - frankly? Once again, the numbers tell a very different story than which we are being told. Yes dear Readers, you're not hallucinating. There is currently at least a $1,000 trillion dollar black hole in the world economy. To get the full picture, please keep on reading.

We have 600 trillion in world liabilities plus more than a 400 trillion-derivatives neutron bomb, all of which will go off when the Westerners (from EU and US) will no longer be able to borrow. The credit crisis could be just beginning according to, the Calcutta-born Australian Satyajit Das , a derivatives specialist who speaks of nearly $500tn. Das doesn't chew his words:

... Defaulting middle-class U.S. homeowners are blamed,
but they are merely a pawn in the game," he says. "Those loans were invented so that hedge funds would have high-yield debt to buy..."
Well, that was then and there is now: since November 22, 2007, the derivatives exposure has taken another new surreal dimension. They grew at the fastest pace in at least nine years to $516 trillion in the first half of 2007. If you wonder which of the two - pure greed or destructive stupidity - rules the world, just know that you're no longer alone.

In America, the clock is dangerously ticking for consumers: the party's over, they are are truly tapped out. While it is difficult to make sense of mega-digits such as 1,000 trillion, this amount doesn't include consumers' debts. Although it is kind of tricky to say when the credit soufflé will flatten, those grasping the dangers of a negative savings rate are already taking action. Well, the smartest and they are a strict minority at this stage. Some amog the most 'cash-strapped' Americans are raiding their 401(k)s . Not knowing what is really going on, many might be prompted to turn to the 2 trillion already in pre-approved when times were booming, in the form of credit cards. To give you an idea of the dire situation, last May and June saw spikes in the amount of revolving debt, 12.2% and 8.4% respectively. The consumer credit 'is' the next bubble without a doubt. There are a growing number of debt-laden homeowners preferring to save plastic first.

Delusions, survival and credit. People want to keep accessing credit when they cannot stretch it financially instead of cutting down spending drastically or do whatever it takes to find an extra job. Talking of jobs, did you know that in 1972, wages reached their peak. Today, real wages are nearly one-fifth lower - inflation adjusted!

Beyond the climax

Now even an infusion of cash doesn't propel the market anymore. The Dow Jones behaves irrattionally. Thanks to the PPT (Plunge Protection Team). The economy as a whole has been rather stagnant in the West. Major European economies are on life support. They cannot overcome their costly social programs and the flood of (clandestine) immigration which is as bad as in the U.S. In a Forbes article we read that France has been in chronic deficit for 15 years. In 2005, Standard & Poor's said it may downgrade the credit ratings of Germany and Italy, two of Europe's largest economies, unless their governments rein in spending and cut debt. In 2007, German unemployment remains stuck at 16.5% and in 2006 Berlin was reported as bankrupt. Further Italy was described as the real sick man of Europe by The Economist in 2005 whatsoever. The credit crunch has also taken hold in Australia where personal debt is worse than during Great Depression. The situation is equally dire in Britain, where house prices are even more overvalued (than in the US). A spectacular crash cannot be ruled out, the IMF warned last month.

It is going to get worse before it gets better: the latest report by Goldman Sachs makes it crystal clear, the global economy hits a 'crunch'. As if this weren't enough, the IMF spreads gloom on 2008 by confirming that impact would be worse in 2008. The IMF and Sachs were seconded by the US Treasury Secretary acknowledging that we must prepare for a prolonged turmoil. Debt deflation is a nasty beast. The majority of bad-debt losses will be uncollectible in whole or in large part.

Forget about the Dow 14,000 and ask yourself frankly if you feel today better off than last year, or two years ago. That consumers must now resort to their credit cards to pay their monthly bills while banks are tightening their standards is a bad omen. As to wonder why the heck they have preapproved two trillion in the first place? On one hand they try to appear wary about further credit deterioration, on the other hand they continue their reckless marketing tactics. Their brand new targets are minority homeowners on the brink of foreclosures and college students, which they recruit as credit-card pushers to circumvent the restrictions banning credit card solicitations on campuses. Meanwhile the sin of usury continues to bankroll Congress. the US Senate Panel okayed $850 billion debt increase, ignoring the remark of 'Bubble Man Greenspan' himself, when he said that the demand for U.S. debt may be at `limit'. Cynicism knows no boundaries: the same man who warned Congress has in fact denied that regulators failed to foresee the problems which caused the global credit crunch. Though this didn't preventing him from applauding the performance of the housing market-bubble! On the top of that, and this is absolutely sickening, 'he' declared early October 07 that the fate of world economy lies with US housing... He should be jailed for the rest of his life. Period.


As foreclosures skyrocket across the US and threaten to bring down real estate prices by 50% in some cities according to Yale University professor Robert Shiller, more and more everywhere we read about the world credit-liquidity crisis unfolding. Truth to be told, central banks face a liquidity trap. Only some anchors and a minority of sound economists see the bad 'Omen' coming our way as Goldman announced this very week that to cut back their lending by as much as $2 trillion. We are so debt-inflated that such a move is going to contract and strangle the economy for good. We may thank the bankers for taking care of our wallets.


Just a question before I continue: did you hear about the British the Northern Rock-bank run by any chance? If you did you're lucky because it was not a major issue on any of the channels I am used to watching. Whether we'll be witnessing bank runs in America remains to be seen. As of 9/2/07, in the Financial Times the following headline could be read: The ongoing credit turmoil has the hallmarks of a bank run.

The current turmoil in the financial markets
has all the characteristics of a classic banking crisis,
but one that is taking place outside the traditional banking
sector, Axel Weber, president of the Bundesbank, said at
the weekend... Some Federal Reserve policymakers also
privately see comparisons between the current distress
in credit markets and the bank runs of the 19th century,
in which savers lost confidence in banks and demanded
their money back, creating a spiralling liquidity crisis
for institutions that had invested this money in longer-
term assets... His comments came as Frederic Mishkin, a
Fed governor, argued for a rapid and aggressive monetary
policy response to any fall in house prices. His diagnosis
of the financial crisis was echoed by other experts...
Paul McCulley, managing director of Pimco, said there was
a 'run on the shadow banking system'. He said the shadow
banking system held $1,300bn of assets that now had to be
put back onto the balance sheets of the banks...

Sorry but weren't we told the Federal Reserve was created in order to avoid that type of moral hazard? Where is the point now to go back to square one and find out that we're in worst shape than before the inception of the bank, in 1913. Yes back then panics were a reality, although the common man was unaware that they were linked to the competition between bankers and their reckless speculation. The same unethical behaviors occurring today on Wall Street, Danny Schechter exposes. Blaming the 'gold standard' was a myth invented for the ignorant masses, which embraced the Fed like a savior. What should have been implemented is putting Congress in charge of regulating the money supply, just as stipulated by the US Constitution. Infate or die. There is no other choice, my friends. The Fed has pumped over $47 Billion into financial system several days ago.

Irrationality plagues debt-based economies since they are backed by consumers 'confidence. The willingness to take on debt goes along with the optimism that one will be able to repay. This explains why the moral hazards linked to paper money are enormous. Most of the people think that printing more money is the solution, and so are bailouts. But what the heck can a bailout achieve when the interbank lending business itself has broken down almost completely? In the Financial Times as of 9/04/09, we could read the scary headline: Sense of growing Crisis over interbanks deals.

Unicredit analysts say: 'The interbank lending business
has broken down almost completely.... it is a global phenomenon
and not restricted to just the euro and the dollar markets...
if this situation continues, it could potentially have very
serious implications...

Are those at the head of our monetary institutions a bunch of idiots or do they have a plan? Considering the state of global finance, which is pretty well documented on moneyfiles.org, it is indeed a difficult to make sense of the credit market shutdown. Here is a NYTimes excerpt, also published as of 9/04/09

... Banks to test debt market this week: All summer,
bankers have sweated on Wall Street. Instead of spending time at
the golf course or at their summer houses, many found themselves
in the office trying to make sense of the credit market shutdown
that had left their companies responsible for the billions of
dollars used to finance leveraged buyouts, yet facing uncertain
prospects of getting investors to take some of the debt off their hands...

Flash back. In his 9/05/07 article, Stephen King, a HSBC banker and regular columnist at the independent.uk, mentions several ugly truths when admitting that in order to save the innocent, we may need to bail out the guilty. Rewards for failures is a typical elite thing. It is how the powers-that-be and their cheerleaders have always colluded. However, this sums it up pretty well. The bailout logic is borrowed from a collectivist concept that the government is the ultimate wealth creator. Though there is something faulty in this particular case: why can't the government just make sure that its citizens are provided with the adequate financial education instead, so the guilty can be prosecuted rightfully? This major failure raises another issue: should the state be in charge of the education? On Blomberg.com, the columnist Mark Gilbert takes a radical stance by arguing in favor of easing the money-market crisis by letting banks go bust. Bailouts merely postpone the outcomes while making it worse. 'Helicopter Ben' and his clique have thus chosen to completely implode the world economy. This is a super-duper bad-loan bailout scam, Bill Fleckenstein concludes. The truth is that Citigroup Inc. and JPMorgan Chase & Co., are just 'Enrons' waiting for their day of reckoning. And the game goes on and on. As the monetary scientists improve their old tricks to save 'them' from disgrace by raising more than $60 billion, some already wonder if the *Banks Stabilization Fund* will work:

... It is quickly being realized that it doesn’t really
solve the problems, Joshua Rosner, a managing director at the
research firm Graham Fisher & Company who had been skeptical of
the proposal, told The Times. The path they have taken of skimming
off the cream from the top doesn’t resolve the fact there is poison
at the bottom....


Doomed profits:

What has happened over the last decades is that the world financial institutions have learned better to shift risks - they think. The result of this shortsighted assumption is that our security systems have remained dormant, allowing the 'easy money binge' to perpetuate the illusion of wealth.

Even Chinese investors are betting all they have on a dead cat bounce. They are so infatuated with their shares that they don't hear their own lawmakers sounding the alarm.

..."Although listed companies achieved rapid growth,
investors should still beware of hidden bubbles behind the
profit surge and invest in a prudent and rational manner,"
said the report released on Sunday. According to the report,
the interim profit figures relied too much on yield of investment
in the securities market and the prospects of a continued profit
increase is doubtful...

This insane credit expansion fuelled by unethical speculation will cost China dearly. Damages are already showing: rivers are so polluted that they are described as on the verge of collapse. In turn heavy pollution is blamed for soaring birth defects and disease englufs the country. This only on a human level. The economic fallout will be unprecedented.

All is a matter of psychology and perception whatsoever. And this will not prevent the world economy from falling off a cliff. Hard data always wins over in due time. Once does not wipe off 1,000 trillion in world liabilities just like that, even if this is electronic or virtual money. Strangely, it is very rare to see 'super bulls' and 'perma-bears' converge: The bulls by calling for bailouts and the bear by nodding pessimistically. The profits of doom will be soon causing the next shocks to the broad market.

Those who are forecasting Armageddon in the hope that
the Fed will come to the rescue are, for the most part, stock-
market bulls. But, strangely, their views are shared by their
opposites, the so-called perma-bears. Perma-bears have long
argued that the American economy in general (and the housing
market in particular) represents an unsustainable bubble, inflated
by cheap credit and a dramatic mispricing of risk. Convinced
that the downturn they have forecast is finally here, they write
off as fantasy any signs that the rest of the economy might
weather the housing and financial-market storms.

Both groups now envision the perfect storm coming our way.

Now comes the nasty 1,000 dollar trillion question: what will credit agencies say after the demise, when an increasing scrutiny will point to them as the culprits responsible for coercive and perilous speculation?

Lethal Collusion Exposed:

In the FTimes last month again, one could read that credit rating agencies were being investigated for their symbiotic relationship with investment banks in the EU. Axel Weber, President of the Bundesbank, said: What we are seeing is basically what we see underlying all banking crises. In America the response has been less sharp but critical nonetheless, the same FTimes columnist reports. Of course the agencies deny any wrongdoing. This shouldn't come as a surprise. They have always done so. It became just more blatant during the subprime debacle. Now that the damages are done, the S.E.C is probing ratings agencies' subprime role. According to CBS, last September, the federal agency hasn't come to any conclusions about their explanations for unexpected losses on those assets. Remember Enron? How many people are currently jailed? And they will be asked again many questions when the consumer credit bubble pops. How does it come that they turned a blind eye to $1,000 trillion black hole, do you think? Barry Ritholtz' conclusion establishes the abysmal track records of Moody's, Fitch and S&P.

Ellen Brown has probed a 300 year-old scheme maintained in place (despite the boom-bust cycles) with the complicity of the common man who views the government and central bankers as wealth managers. The cliques at the top, which have enjoyed the ignorance of the masses for centuries long, are now faced with a boomerang effect. For them too, chickens have come back home to roost.

Do you believe me now when I speak of 'financial detox' whose consequences may be as severe as the great depression? We didn't get there because of a lack of regulations but through products sold as exotic financial instruments (credit derivatives, commercial paper, hedge funds, CDOs, CDSs, SIVs, ABCP, etc), hence any astute way to recycle debts found its way hrough. I don't know how work most of these instruments, but in the Asia Times, James Cumes, describes this financial addiction quite well:

When everyone in the house is crazy, only the sane seem
like fools. So it was when the financial addiction spread everywhere.
Then everyone who was not taking his daily dose of heroin or cocaine
became the fringe-dweller, the oddball, the brake on progress, the
party-pooper at the greatest no-cash-down, how-to-spend-it shindig
that our planet has ever known. Debt piled on debt everywhere: in
households, corporations, public finances and international deficits,
in magnitudes that had never been even glimpsed in the most creative
imaginations before.

Back to the basics

Pessimism doesn't encourage to pile on debt, and until the loan is spent generally a feeling of invincibility can be experienced. Credit happiness is short-lived. Just as with drugs, there is a withdrawal.

Although consumer borrowing is a very important part of the equation, debt monetization (or recycling) between banks might be even more so. There are currently fears that lending between banks have ground to a halt. In the EU, we're talking of 100bn that should have been dealt with last August. In the UK it was a matter of 70bn over the next 10 days (in a article written in August). More alarmingly, ECB made 269-billion euro refi offer as market tensions persisted as of 09/12/07. Not only banks created a monster in the first place, now they also want us to believe that refinancing debt to pay debt is the safest bet on earth. The Bank of England Governor must be sweating heavily though. A few days ago he declared that markets are 20% overvalued and poised for severe fall.

On September 9, another HSBC executive endorsed 'the credit squeeze' on CBSMW but with a much gloomier tone. The worst is not over. According to him it is all about damaged confidence among the market players that needs to be restored. Confidence is broken and the outcome will be 'da' crash of the millennium Dr. Ravi Batra explains while remaining positive in the long run:

... we are now more overvalued than Japan was in 1990.
So certainly most American financiers know we are in a bubble
economy but they hate to admit it because they think that
they are one way or another responsible for it.... That could
lead to a political revolution, but I do not believe it will
lead to a dictatorship. I think we will see the rule of money
end and that we (the majority of Americans and citizens around
the world) will benefit by a tremendous revolution... Well
first there will be a lot of destruction of money

Citizens and investors alike will learn the hard way that coercion is the root of all evils. Indeed, how coercive is forcing people to take on 401ks and IRAs to avoid taxation, not to mention taxation itself. This among other things: such as encouraging the use credit cards to buy stocks by making plastic a way of life. What to think of super bonuses prompting CEOs to cook their books, all of which condone short-term gambling along with the pump and dump mentality. It is interesting to mention that an average CEO' salary was about 25 times more than the common worker in the 70's. By 2005 it shot up to 465 times more! The worst coercion is without a doubt cheap interest rates delivered by central banks directly and which rejoice people gravitating around the lending industry. Cheap interest rates go along with pervasive corruption and predatory lending.

In short any type of coercion provokes an amoral speculative frenzy. And this looks very blatant when analyzing the story behind every boom and bust cycles. Such trends will go away the day the average investor will have understood that becoming a 'fat cat' in a short period of time is generally the result of a lack of discipline and ethics - at the expense of the gullible being lured into asking the government more incoherent regulations that do not address the fundamentals.

Something fishy:

Every year and worldwide, thousands of college students in economics are recognized by their peers. A distinction they welcome proudly as the door to brilliant career opportunities open. If they have the right connection, all the better: many will end up working for big financial firms or even government or centrals banks. Although is surely is amazing that our fate lies in the hands of those prominent people one does not need a PhD in economics to understand why the obsession with growth dominates all political debates, and why lawmakers make employment a high priority of theirs. To grasp the rhetoric behind the numbers, one has to take a look at the big picture to see why 'growth and GDP' are in fact a tale concealing one of the most blatant fallacies ever.

Although this is recurrent in the so-called rich countries, let's take the example of the USA. How does it come that the twin deficits are ever increasing, the national debt just went past 9 trillion dollars. Finding items 'made in America' has become a tour de force - all this despite the boom! The problem is that the word 'economy'(and 'forest' alike) is an abstraction. Both do not exist. A forest is composed by trees and an economy sustained by humans.

Not only because people cannot sell and buy everything at the same pace, making theories and rules for the majority does not work. Basing the GDP on consumption is additionally fatal since it is impossible to live beyond one's means forever. If you want to find an explanation to the business cycles, here it is.

The End Of Conventional Wisdom

The GDP fairy tale has been conventional wisdom for decades. Anyone having a good sense of logic see the hoax of a model based on debt consumption and extreme consumerism. Spend or die is economic cannibalism. One does not need to be a rocket scientist to ponder the origins of our 1,000 trillion sinkhole. To be fair there are other ingredients contributing to the mess we find ourselves in today but since economics is the only way to gauge 'Property Rights' and 'Freedom', for the sake of our survival we must reject doomed theories such as these. Let's cross our fingers very hard and take action, Dr. Ravi Batra may not be a dreamer after all.

Posted by CRIMES AND CORRUPTION OF THE NEW WORLD ORDER NEWS mparent7777 Marc Parent CCNWON at 1:51 PM 0 comments Links to this post