More Gnomes, Sex And Financial Chaos
July 8, 2008
Elaine Meinel Supkis
The insane, stupid and useless 'buy-out/buy-up' financial markets collapsed very suddenly last July due to the abrupt ending of the noxious Japanese carry trade. Now, all the ugly underbelly business of this cannibalistic capitalist financial system is showing its true nature yet again. For this happened in the past, and not too distant past, either. Three times in my life, this same boom/bust of hostile take overs by con men has blossomed and then collapsed bringing vast banking and social woes in their wakes. Why we do this over and over again baffles me. It is a great way for con men to get rich. It is a thoroughly lousy way to run a capitalist society. It increases debts to unimaginable heights while producing exactly nothing in return! And the side effects are horrible: lay offs, bankruptcies, social chaos and the destruction of the industrial base. Today, the toads and gnomes doing this destruction mourn the loss of free leverage to keep up their destruction.
Kekst, Dealmakers' Publicist, Sees `Frightening' Merger Market
(Bloomberg) -- Gershon Kekst, who pioneered the field of public relations for dealmakers as an adviser to Henry Kravis and Sanford Weill, said the current credit-market contraction is the most ``frightening'' slump in four decades.``This is more severe and more intense, and if I had to use one word to characterize it, in contrast to the 80's, it would probably be frightening,'' Kekst, 73, said in an interview. ``We just don't know what's going to happen. The economy is being tested in a bear market that could go for a long time.''
*snip*
Kekst, who agreed to sell his firm to Publicis Groupe SA last week for an undisclosed price, has had a front-row seat in four M&A booms and the busts. He worked through the merger wave of the 1960's, led by conglomerates such as Textron and ITT; the 1980's takeovers fueled by high-yield, high-risk bonds from Drexel Burnham Lambert; the Internet and technology mergers of the 90's; and last year's record private-equity buyouts.The current credit crunch, triggered by defaults on U.S. subprime mortgages, is more severe than the slump that followed the savings and loan crisis and the collapse of Drexel, Kekst said in the interview.
*snip*
He said he once asked his friend Flom whether Kekst & Co. would be crippled if mergers and acquisitions dried up.``You're not in the M&A business, you are in the `seykhl' business,'' Flom replied, using a Yiddish word meaning ``street smarts.'' ``Business leadership is going to find issues and problems to get themselves into long after the M&A business is gone.''
Three times we went through this same stupid cycle. Three times too many. If there is anything that should be forbidden, it should be hostile take overs based on leverage via getting cheap loans from some foreign central bank that wishes to destroy our economy so they can win WWII. Just because someone surrenders doesn't mean a historical struggle for global power ends. Far from it! Wars can rage for centuries and have raged for centuries. The hostilities between France and England, for example, are still very evident today even if it is mostly expressed by jokes and poking at each other on the public stage. To this day, the Civil War still rages in the US via various means. The Civil War slave state/free farmer state divide is very much alive today.
First off, the gnome named Kekst grumbles and complains that 'We just don't know what is going to happen...' HAHAHA. Right. I hate to tell Mr. Kekst this but he is a humbug lying bastard. Of course he knows what is happening today and what will happen next. He is even older than me and I am an old crone, sort of. Even so, back when I was a young crone, I knew what would happen next with these stupid schemes to borrow money so hostile take overs could be foisted upon everyone: it leads to a raging stock market bubble and then a hideous, ugly 1929-style collapse! DUH. Even an idiot can see this and gnomes know this perfectly well. I lived in this gnomic community in the past when my ex-husband worked on Wall Street, by golly. Since I used to go out drinking with these well-padded gnomes who would subsidize my booze in order to look at my breasts in a dim room, well! I listened to their gossip. And guess what?
They are very secretive to outsiders but when drunk, will spill everything to a buxom young female who smiles and bats her eyes at them. It is laughably easy to charm a gnome into handing over his precious gelt. Eh? Of course! This is why TV economics shows are infested by a thick mix of old, beat up gnomes chatting with buxom beauties who then say, in a piping, pretty voice, 'Remember, buy stocks NOW! They will only go UP! Tee-hee-hee!' See? This is why I am not on TV. I am past prime. Alas, when I was a lass, we females were relegated to the bars on Broadway and Wall Street, not on TV. Shows us there is progress, eh?
Today's gnome specimen does point out that he and his buddies have managed to create a MUCH WORSE than the last three times they did this to our economy. This cycle, they managed to drive everyone deep into debt with hostile rivals overseas. They have created an ocean of debts we can't possibly pay off and thus, we will now ALL go into bankruptcy like we did in 1929. Only this is much worse: back then, our government was solvent! We had huge gold reserves. We were still King of the Hill. We still had an industrial base and a very good trade balance. Thanks to tariffs and barriers. The tax burden was fairly low, too.
Kekst is certainly in the 'seykhl' business but more so, he is like the perennial three card monty players I used to see outside my office on 43rd Street in Midtown Manhattan long ago: he shuffles the same three cards, talks very fast and steals people's wallets while they are distracted. Beats purse snatching by pushing little old babuskas into the gutter. On the other hand, when the three card monty game fails, the push the babuska game commences. We call this 'inflation of food and fuel'. The gnomes always are put on a leash after wrecking our economy. And then spend the following ten years whining about this until they bribe enough politicians to unleash the Power of the Ponzi yet again. Then we have the media trumpet 'A NEW economy!' And everyone talks about how we will all get very rich playing the same stupid game we lost twice before! This is madness, of course. A failure to remember the past. A childish belief that cannibal economics is capitalism.
Hurricane Bertha shifts direction
(CNN) -- Hurricane Bertha -- the first hurricane of the 2008 Atlantic season -- began a shift in direction Tuesday morning, a day after growing to Category 3 status, according to the National Hurricane Center.
Already, we have a major hurricane so early in the season. And it formed very swiftly in the Atlantic. The Gulf is one hot tub of potential hurricanes. This is very similar to economics: an ocean of red ink that is in a hot market becomes the cradle of dozens of destructive hurricanes. These then roar ashore one right after the other, wiping out whole cities. New Orleans is still not rebuilt, just for example. Miami Beach sits like a sitting duck, waiting to be destroyed in a hurricane. Just like, as per usual, the very expensive real estate in California is again, burning up. While waiting for the inevitable next blowout of the San Andreas Fault.
US treasury bonds, which are a large segment of the bond market, are used to absorb trade deficits caused by free trade, globalization, off-shoring, outsourcing and both legal and illegal immigration and to keep all the inflation we have exported abroad from returning home. Foreign countries with large forex reserves are told to use their dollars to buy interest-bearing treasuries instead of buying hard assets in the US which would be highly inflationary for our financial system because exported dollars would then reenter our domestic economy and increase our money supply. In this way, the rampant inflation caused by profligate issuance of money and credit by an out-of-control Fed in its attempt to cover up the destruction of our economy stays safely overseas, having been absorbed by the treasuries. This profligate issuance of money and credit was created by the Fed to support the free trade-globalization agenda and the transnational conglomerates, which are gutting our economy, especially our manufacturing sector.This Ponzi-scheme is now unraveling as foreigners shun dollar-denominated treasuries yielding negative real returns as inflation, a falling dollar and increased risk destroy the value of outstanding treasury bonds. The floodgates are now starting to open as a sea of dollar forex flees in terror from dollar-denominated treasuries into hard assets, the effects of which you are already starting to see in highly elevated commodity prices which are also being driven by banks that are desperate for profits to improve their balance sheets by exploiting the Enron loophole. Hold on to your hat, because this flow of money back into our domestic economy is just getting started. That is why the FTC is discontinuing publication of its statistics regarding foreign investment in the US, citing budgetary concerns, just as the Fed did with M3. Wait until all this money pours back into the US economy. Inflation will go inter-dimensional and take us through a wormhole back to the days of the Weimar Republic as gold and silver head for the Einstein-DeSitter radius at the outermost bounds of the visible universe.
A good, comprehensive read. It really puzzles me why economics writers don't talk about sex more. Being mostly males, I would imagine they would see the obvious. Oh well. One thing Chapman tells us in this article that shocked me was the Federal Government hiding yet more statistics! Just as they now lie about inflation and this causes tremendous damage to the banking as well as business sectors, the Federal Reserve now lies about the M3 numbers and now this: the FTCis now concealing foreign investment statistics???? I use these! It is part of the deep tracking system we run here at Culture of Life News! Up until the crash last summer, the US used to boast about 'foreign investment' that was pouring in. I know it is still pouring in. There are trillions of dollars floating around the planet seeking some way of making money by being activated. Sitting in vaults, it is useful only for hiding trade surpluses from the monetary markets that were supposed to drive up the currencies of all nations with trade surpluses. Like China and Japan, just for example.
The Fed is ultimately responsible for creating inflation along with the Federal government running on red ink. But on top of this is the red ink created by the gnome community who operate offshore banking and financial systems which are fake front organizations. They are circumventing banking restraints by going overseas to Japan for 'free money' which is then hauled back into America and dumped into the money stream here via the stupid 'buy-up and buy-out' business of these con artists. The ONLY way to stop them is to bankrupt the entire system. So far, the Fed has worked very hard to protect these stupid gnomes from their own follies by bankrolling them when their Funny Money™ flows fail. Of course, each time the gnomes crash the entire economic system this way, some of them get caught in the gears and are arrested. Then laws are passed to prevent this sort of stupidity. Then these laws are removed again.
Wikipedia on Drexel Burnham Lambert:
Drexel Burnham Lambert was a major Wall Street investment banking firm, which first rose to prominence and then was driven into bankruptcy in the 1980s by its involvement in illegal activities in the junk bond market, driven by Drexel employee Michael Milken. At its height, it was the fifth-largest investment bank in the United States.
*snip*
By the late 1980s, public confidence in leveraged buyouts had waned, and criticism of the perceived engine of the takeover movement, the junk bond, had increased. Innovative financial instruments often generate skepticism, and few have generated more controversy than high yield debt. Some argue that the debt instrument itself, sometimes dubbed "turbo debt," was the cornerstone of the 1980s "Decade of Greed." However, junk bonds were actually used in less than 25% of acquisitions and hostile takeovers during that period. Nevertheless, by 1990 default rates on high yield debt had increased from 4% to 10%, further eroding confidence in this financial instrument. Without Milken's cheerleading, the liquidity of the junk bond market turned dried up. Drexel was forced to buy the bonds of insolvent and failing companies, which depleted their capital and would eventually bankrupt the company.
Each cycle of leveraged hyper-hot market buy-outs hits us, the gnomes play a very clever game: they rename everything. The magic of a new game and a new explanation for obvious scams is very important. This is the 'Street Smarts' part of the business. The fast-talking con man's job. First, this assures the marks that they are not seeing a repeat of the three earlier boom/busts. Instead, this is NEW. Also, the gnomes assure everyone, the small hole, the tiny opening within strict laws, is small, not huge. Of course, out of these small holes crawl some of the biggest monetary monsters on this planet! We see this clearly in the Derivatives Beast's birth and subsequent growth. The visible part is gigantic and is only 10% of the actual size of this monster. Once the tiny hole is made in the fabric of the law, once the hole is drilled into the bank vaults, the gnomes start to steal small change. Then larger amounts. In the end, they always blast through the banking rule's walls and make the tiny hole gigantic and then rush in to grab all the world's potential wealth. This always destroys the systems and everyone goes bankrupt. This is the price for allowing continuous theft.
I always hated Greenspan. As per usual, all Fed chiefs hand over their governance when things are about to collapse. This happened in 1971, again in 1978, 1987 and in 2004. When Greenspan took over, the Drexel business mentioned by Kekst at the top of this story, was beginning its huge collapse. Here is one of Greenspan's earliest speeches as a new Fed chief:
September 14, 1988
More generally, the major public benefit of Glass-Steagall repeal would be lower customer costs and increased availability of investment banking services, both resulting from increased actual and potential competition and from the realization of possible economies of scale and scope from the coordinated provision of commercial and investment banking services We believe that repeal of Glass-Steagall would reduce underwriting spreads and therefore lower financing costs to businesses large and small, as well as to state and local governments In addition, bank holding company participation in dealing currently ineligible securities is likely to provide the benefit of enhanced secondary market liquidity
Just as this speech was being mouthed, the problems with the collapse of the huge investment house of Drexel Burnham and Lambert was hitting the front pages of the dailies. Is Mr. Greenspan aware of all this? Is he, the Übergnome of all gnomes, is he aware of any of this? Nope. He is happily doing his job for his fellow cave dwelling community of gold-mad sex-starved fellows: he wants more laws passed when the gnomes destroyed the economy back in 1929! The laws passed to cut them off from opening holes in the walls and thus, draining away all the wealth of this nation! Look at what Greenspan wants: more LIQUIDITY! Indeed, throughout the last 30 years of the US running up amazing levels of debt at every possible venue, we see a cry for more liquidty! Not savings, more credit. More debt instruments. Even as the entire system is crashing down upon our heads, Bernanke and his buddies are focused on one thing only: to create more debts.
Some provisions of the bill unnecessarily inhibit competition As I noted in my introductory remarks, the encouragement of competition is not the only objective of Federal Reserve regulatory policy. Other important objectives include a safe and sound banking system, prevention of conflicts of interest, and limiting the federal safety net to insured depositories. These objectives have led us to support locating certain expanded nonbanking activities, including expanded securities powers, in a separate subsidiary of a bank holding company. Successful implementation of this strategy requires the construction and maintenance of effective "firewalls" between a bank and an affiliated securities firm.Thus, we support most of the firewall provisions of the Depository Institutions Act of 1988. However, two of the firewall and securities activities provisions of H R 5094 are, in our view, unnecessarily restrictive and would, if implemented, impose competitive costs that exceed any benefits. The first such provision is the exclusion of underwriting and dealing corporate equities from the set of expanded securities activities In view of the extensive firewalls, particularly those limiting credit transactions and asset sales, insulating affiliate banks and thrifts from potential safety and soundness and conflict of interest concerns, we see no reason for an absolute firewall prohibiting equity activities.
A second place where we believe the proposed bill would unnecessarily inhibit competition is its restrictions on the sharing of similar name, logo, premises, and joint advertising between the securities subsidiary and the affiliated bank or thrift. Restrictions of this type would dilute and perhaps prevent some of the cost-saving synergies and economies of scope that are expected from the joint provision of these activities within a bank holding company The other extensive firewalls contained in the bill, and in the bill passed by the Senate, are sufficient to insulate the bank from risk, to warn investors of the nature of their risk, and to meet safety and soundness concerns is this area
Firewalls and competition: buy up and buy outs KILL competition. Note how this hasn't inhibited them at all. Indeed, the Fed has thrown away all authority when it comes to creating monopolies and cartels. The buy-up hostile take overs are all about killing competition. This is why, as the new mega-corporation 'grows' in size, the parts that used to be separate are SMALLER compared to before. People are fired, things are thrown away and prices are raised. And the debt on all this is astronomical.
Greenspan in 1988:
Presumably because of the federal safety net and, therefore, a concern over the potential size of failed institutions, banking is the only industry to which laws explicitly restraining overall, or undue, concentration apply. In addition, these restraints apply only to the acquisition of nonbank firms by bank holding companies, and do not appear in any of the nation's antitrust laws.The proposed bill contains specific numerical standards prohibiting the acquisition of a securities firm by a bank holding company. These standards include prohibition of a merger if both parties are among the top 15 in their respective industries, or if the bank holding company and securities firm have total assets greater than $30 billion and $15 billion, respectively.
While we recognize that the anxieties underlying inclusion of new undue concentration standards in H R 5094 have a lengthy historical tradition, there appears to be little foundation for such anxieties in today's environment This conclusion is supported by two observations. First, the nonbank financial sector in general remains highly fragmented, in spite of the fact it is generally much less regulated than banking. Second, the Board's experience in implementing section 4(c)(8) of the Bank Holding Company Act as amended in 1970, which allows bank holding companies to enter nonbanking activities approved by the Board, has not been marked with any general tendency toward increasing overall concentration in the approved activities. Under section 4(c)(8), when considering expanded bank holding company powers the Board is required to account for possible adverse effects such as undue concentration of resources.
Greenspan knew back then, the sole reason the Fed exists is to be a backdoor around Congress and to provide cover for inflationary lending. Their clients are not the American people. They are fellow bankers and Wall Street. The Fed recognized the utility in keeping the populace quiet and at bay. So they will allow some regulation and controls. But the point is to tempt the people into reckless debt creation. And this has been a total success. On all fronts, people are heavily encouraged to go into debt. From top to bottom. There is a lot of pro-debt growth propaganda. This makes the gnomes richer since they make these debts out of thin air. Very easy for them to do. Hard for anyone trapped in this system to exit. Greenspan had to juggle Congress and his public image so he could slowly unwind or minimize all laws passed during previous banking collapses. He had to sweat bullets from 1988 to 1991, trying to increase debts while the system was in full collapse. Finally, with the birth of the New Venus, the 0% Japanese lending by the Bank of Japan in 1995, Greenspan could give the green light to infinite leverage which was safely tucked away in Tokyo.
In closing, Mr Chairman, the Board believes that the Congress now has an historic opportunity to put the nation's financial system on a sounder footing—perhaps a unique opportunity to make it more competitive, more efficient, more responsive to consumer needs, and equally important, more stable. It would be a major waste of Congress' and others' scarce resources if all the hard work on this subject of the last year were lost. We urge you in the strongest terms to aid in the passage of legislation to repeal the Glass-Steagall Act and to put in its place a new framework allowing the affiliation of banking organizations and securities firms as provided in the Financial Modernization Act and our suggested revisions to the Depository Institutions Act.
The protections Congress put in place that was supposed to restore 'stability' were all removed. The efforts by Greenspan and the Bush family came to fruition when the GOP took over the Congress and threw caution to the winds. President Clinton went along with the joy ride. In one regard, this dynamic did fix one thing: the Federal overspending. Anxious to clip Clinton's wings, Congress depressed government spending. And the US economy took off. Greenspan noted inflation was a problem so he raised interest rates but only so that Gore should lose the election. For Greenspan remembered very well, his friend Nixon complaining bitterly about Martin Jr. doing this to him in the Kennedy race. It was pure politics.
And corrupt. There are many forces at work and examining and remembering all of them at once is important. This is why reading history and especially, going to the original sources is so important. It brings up information that is vital but easily forgotten.
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