Dentists Hurt But The Teeth Get Fixed
March 20, 2008---Vernal Equinox Day
Elaine Meinel Supkis
In the middle of a big, nasty storm that has drowned a number of Americans as it has swept across the country,has been flooding my mountain outback. A great time to crack a molar into small pieces. So I had to visit the dentist. They are scary, aren't they? But instead of giving me candy, he takes out drills and huge syringes and then begins to grind, pound and hammer on my molar until it was repaired. And now my jaw hurts like crazy, thus this late story instead of my usual morning story. This reminds us: fixing things often means pain and suffering but if we take pain killers and eat candy, all our teeth rot out. And this is why the Bernanke rescue is a total disaster: it not only didn't fix our broken, rotted teeth, it is going to make them rot even more and perhaps, fall out! Like, we go bankrupt!
Buy Banks as U.S. Financial Crisis Is Over, Bove Says
The U.S. financial crisis is over and the decline in bank stocks offers a ``once in a generation opportunity'' for investors, according to Richard Bove, analyst at Punk Ziegel & Co.``The last time an opportunity of this nature existed to buy bank stocks this cheap was in 1990,'' Bove wrote in a note to investors. ``This is a once in a generation opportunity.''
The Lutz, Florida-based analyst said the Federal Reserve's rescue of Bear Stearns Cos. and actions to increase banks' access to capital have been ``innovative, dramatic'' and ``brilliant.''
Nothing has been fixed. Nothing has changed. A whole host of financial investment houses and banks in the G7 nations have dropped their losses overboard but ONLY because the central banks have bankrolled them so they don't roll over, dead. This process protected all the players in this game. Not one of them has been forced to cough up any of their ill-gotten gains they gave themselves for deals they brokered. Deals that proved to be very toxic for businesses and investors. These people lost money.
As the lawsuits begin to proliferate as angry investors try to recapture their money which was intercepted by the men and women running the biggest trading/banking houses on earth, we must step back and examine what has happened. Since last August when the dynamo that pushed all those reckless deals broke, the central banks have been making one rescue after another. They have been dropping interest rates to well below anyone's concept of the rate of inflation. They have injected tremendous sums of money into the system to make up for rising losses. The sums must be well over $1.5 trillion, probably reaching to $2 trillion at this point.
Instead of honestly telling us where this cash is coming from, the central bankers are lying. Our own Fed pretends this is non-money in the sense, it is replacing lost funds, not making new ones. But the idea that the funds the vanished were inflationary in the first place and are causing global inflation, is not discussed. As global inflation continues to wreck world economic systems, the central banks are propping up speculative stock markets in the hopes that the flood of money, which I think is around $2 trillion, doesn't all flood into rare metals and oil.
Thus, the focus on boosting global stock markets. The price of gold and oil are dropping at this time. Gold, by the greatest amount. As I keep pointing out, the weapons of the bulls can savage all bears at various times. Bears have to be very patient and retreat whenever a bull is cornered and calls upon all the powers of the government and international trade to boost bull markets. This is why markets don't follow a bell curve. All down markets have huge upsurges that usually are faster and higher than any rise during a bull market.
The downside of all these rescues don't show up for at least 6 months to a year after desperate measures. During the Nixon years, for example, every possible tool to keep markets roaring were used. Including outright wage/price controls. We are entering a nasty part of all inflationary cycles: the government doesn't give money to either the consumer or small businesses. The money is funneled to the big banks and corporations. They then renew the buy-out schemes in order to grow faster than inflation. Money flows like crazy and the effects are felt at the bottom rungs of the economy as raging inflation in food and fuel.
As the interest rates fall to 1% or less for the corporations and the big investment houses, it rises for the ordinary person who has to use Visa cards. As inflation gets a second wind and returns even more ferociously, we have stagflation. Since we know that giving all the biggest money spenders on earth who all use their loans to make more loans, the fundamental inflationary system set in motion by these very investment houses will cause inflation since they will use this money to get loans so they can buy influence, stocks, commodities and corporate control.
The issue of offshore banking and offshore accounts that suck in money and don't pay any taxes is still there. Instead of negotiating with all these pirates who run places like Goldman Sachs of JP Morgan and forcing them to cease and desist in offshore accounting and tax evasion, the Fed and the Treasury are giving them even more money to bleed from our own, more normal, banking system. So the imbalances, the wrong directional flow of money, the disparities and difficulties in the present system are not only not gone but have been given a new lease on life.
The fury and fear of these global financial players was totally fake. I know this because they didn't surrender a thing to be saved. They didn't have to retreat and struggle some more. They played a Mohammed Ali 'Rope-a-dope' boxing scheme. They pretended to be weak, collapsed backwards and then the governments all rushed in to prop them up for free! No one was arrested. No one is being investigated. Nothing was done. Scot free.
Bloomberg notices the elation of these guys and where the money is going:
The money flowing into commodities is ``absolutely enormous,'' James Proudlock, commodity product head for Europe, Middle East and Asia at JPMorgan Securities Ltd., said at a sugar conference yesterday in Geneva.There are 361 commodity funds that had $98 billion in assets as of Feb. 28, compared with 345 funds with $80 billion at the end of 2007, he said.
The rally, according to Paul Touradji of the $3.5 billion hedge fund Touradji Capital Management LP, was a ``buying orgy'' that had inflated prices and increased the risks of a collapse.
Commodities ``have all gone parabolically higher on frenzied money flow,'' New York-based Touradji wrote to clients March 10. ``Unless that money flow continues ad infinitum, in which case prices would go to infinity, then the fundamentals had better be improving as quickly as prices have been, otherwise there is nothing else to keep the markets at these levels.''
Up until yesterday, the money was flowing away from world stock markets and towards the grinding, desperate commodities markets. Far from being without funds, the big investment houses had plenty of money, they just had plenty of debts they couldn't roll over. Since the G7 central bankers rolled over, there is no worry about these debts. They are again, 'off the books'. So the government has soaked up all the negative junk. And now the carry trade can resume as long as the dollar is propped back up again.
The carry trade is all-important here. This is the 'free money' source that can be tapped for infinite loans so long as the secondary loans made with this money can be soaked up by the central banks. So far, the amount is vast. Since the financial houses can run up trillions in dollars in bets and deals, this process can go to infinity if they feel they now have the central bankers' 'number'. Push the panic button and the money floods into their accounts while all the bad deals flow rapidly into taxpayer-supported accounts.
I am not the only person alarmed by all this. Here is an analysis from Kathleen Pender:
There are side effects to financial medicine
But make no mistake: If the feds succeed in preventing a financial collapse, there will be a price to pay
.
"It's hard to say what the unintended consequences will be," says Joshua Rosner, managing director of research firm Graham Fisher.Economists say they are likely to include some combination of higher taxes, higher interest rates, higher inflation, slower economic growth and a weaker dollar.
Let's remember for a moment what got us into this predicament.
After the stock market crash in 2000 and the terrorist attacks in 2001, the Federal Reserve kept interest rates too low for too long. The federal funds rate stayed at 1 percent throughout 2003, long after the 2001 recession had ended.
Low rates fueled speculation in housing and the creation of new mortgages and mortgage-backed securities that were sloppily underwritten, poorly rated and widely misunderstood. Hedge funds and other investors used these securities to borrow money to buy other assets, creating a mountain of debt atop a small slice of fragile collateral.
Banking regulators, Congress or the Bush administration could have stepped in to restore some sanity to the markets but declined to do so in the name of homeownership and free enterprise.
These rescue operations are occurring more and more frequently. The rates are being hauled downwards with greater energy as the central banks enforce depression-level interest rates on top of a wedding cake of generalized inflation. My dentist, for example, was grousing about how he is being forced to drop prices by using Chinese labor to make crowns and bridges. But the customers are vanishing due to lack of funds for dental work! If no one can afford a dentist due to spending most of their income on other necessities. So teeth decay and the people become more and more ill and eventually need to have all the teeth pulled! Inflation can go subterranean for a long time this way. But commerce suffers. All the offices around my dentist's office were now empty. Just one year ago, all were full. The drop in commerce, the collapse of many businesses, can't be fixed by giving the biggest investment houses trillions in super-cheap loans!
This money will filter into the system it toxic ways. All the big players are laying off people right now. They know the economy itself is in decline. They don't mind playing stock market games while the actual economy collapses. This is just like Japan. Cheap loans for the top people. The money stagnates up there and never reaches the bottom ranks. This could be the final stage of the 'give all the breaks to the tops'.
Pender:
Rep. Barney Frank, D-Mass., has a proposal that would give the Federal Housing Administration (a government agency) up to $300 billion to guarantee refinanced mortgages after their balances have been significantly reduced by the mortgage holder or lender. The plan would also provide $10 billion in government financing to buy and rehabilitate vacant, foreclosed homes."We are going to nationalize the mortgage market," says Ken Rosen, chairman of the Fisher Center for Real Estate at UC Berkeley, consultant and hedge fund manager. "It's the outcome of not regulating at the right time."
As much as he dislikes it, Rosen says, it's the right thing to do in the short run. "If they did not stop the credit crisis, we would have something much worse - a meltdown like we had in the '30s," he says. But "it's not a good thing in the long run."
Rosen predicts that when all is said and done, there could be as much as $1 trillion worth of losses in the financial system. He predicts that investors will bear 60 percent of the losses and the government could shoulder the rest.
All the losses are being shifted sideways to the government. This is without the slightest attempt at afixing blame and punishing the ultimate actors who created this mess. The 1930's was not caused just by over-enthusiastic stock brokers or buyers of properties in Florida. The collapse of both the British and German empires and the bankruptcy of Germany were the real causes of the Great Depression. So it is here: the US is going bankrupt. I don't see any way around this: stocks may soar but the bankruptcy moves ever closer. The US is NOT leaving Iraq or Afghanistan. Billions are bleeding every month overseas. The US is egging on a war with Iran that will destroy our economy. And we are edging towards the inevitable Olympic boycott. Any time Russia or China gets to host the Games, the West finds all sorts of reasons to boycott. The US can invade countries and cause tremendous destruction and still host the Olympics.
But not Russia or China. Both are held to a different standard. Because of this, China will probably move to cause us a little problem: they will redirect global monetary flows even more.
Fed Bypasses Emergency-Loan Policy on Rate for Securities Firms
The Federal Reserve bypassed its own emergency-lending policies to let securities firms borrow at the same interest rate as commercial banks as the central bank sought last weekend to stave off a financial-market meltdown.Guidelines revised in 2002 say the Fed should charge non- banks more than the highest rate that commercial banks pay. Instead, Chairman Ben S. Bernanke and his colleagues, in emergency votes on March 16, invoked broader authority in the Federal Reserve Act to give Wall Street dealers the same rate as banks, a Fed staff official said on condition of anonymity.
Backstopping securities firms, coupled with last week's action to keep Bear Stearns Cos. afloat before its sale to JPMorgan Chase & Co., represent the central bank's first lifelines to institutions other than banks since the Great Depression.
Not only were the 'rescues' unprecedented. They are unusual in every possible way. And this is because the entire system is unglued. And what has actually unglued?
Our trade deficit yawns ever wider. Oil is very expensive, they trumpet the price falling from $111 to $103 a barrel. Whoopee. Gold has collapsed, as I predicted several weeks ago, to the $900 an ounce level. But the future of both is obvious: inflation is going to reassert itself or the collapse will continue downwards. The stock markets will form their third bubble in 10 years but only from a totally fake, totally artificially created by the central banks and utterly inflationary.
Comments