Dead Banking Parrot Tales: Punishing The Guilty

September 2, 2008

Elaine Meinel Supkis

I now know how it felt to people who were sensible, back in 1914, watching the status quo vanish into the fogs of war after a rather meaningless prince who was hated by his own wretch of an emperor father, was shot by students in the Balkans. All the grossly-overbred, inter-related emperors in Europe who were cousins all fell off the same cliff in unison. Dragging their countries after them. And everyone fell into this pit of death that was virtually unescapable. Revolutions and coups spiraled out of the economic and sociological collapse of WWI. So here we are, seeing our great empire let go of the last finger hold on reality and fall into the Abyss. There is nothing we can do to stop this insanity except to chronicle it and project into the future.

By Dana Milbank for the Washington Post:

"Join us in prayer for healing our U.S. Economy NOW," his hand-lettered sign announced as he stopped passersby across the street from the Capitol. "Our Congress Needs God and Prayer Now."

Within hours, Twyman's prayers were answered. As if touched by the hand of God, Senate leaders abandoned their partisan ways and declared a new day of harmony and togetherness. "We're going to have a significant bipartisan victory on the rescue plan here in the Senate tonight," Minority Leader Mitch McConnell (Ky.) exulted after lunching with his fellow Republican senators. "I think you're going to see on display tonight the Senate at its best."

Minutes later, McConnell's new friend, Majority Leader Harry Reid, came to the same microphone outside the Senate chamber with the same message. "I know this hasn't been standard procedure over the last couple of years, but there's been really hard work with the Republicans," he said.

Was this a rescue or a hold-up? Who is being stuck with the bill for this Xmas tree of Santa goodies for all good little lobbyists? Obviously, the entities being rescued are the Senators and the guys bribing them. This is the dirty end of our democracy. I am an old lady who doesn't even have white hair yet. But I can clearly remember when Ronnie Reagan, the first of the truly irresponsible spenders, ran for office.

A few presidents ago the National Debt was the most pressing thing that our political leaders and political hopefuls had on their minds.

Ronald Reagan in his campaign for the presidency in 1980 told us all about a stack of dollar bills stretching from the planet earth to the moon. This stack of paper money was to represent the one trillion dollar mark in our advance to national bankruptcy. Our National Debt had not yet reached this benchmark in fiscal irresponsibility and Ronald Reagan was to be our knight in shining economic armor who would stop this catastrophe from happening.

I was totally against Reagan for lots of reasons. The fact was, this charlatan is the icon of 'good Presidents' despite being an inside/out, total liar. He nearly trebled the national debt when he was finished. This, after running on eliminating this. He was not punished for being a liar and a fraud. He was hailed as a great leader because he cut taxes and he gave out goodies. Taxes were certainly much too high by 1980 due to workers successfully getting wage hikes to keep up with inflation. Instead of doing the simple thing of indexing tax rates to inflation, Congress maliciously kept it decoupled.

So people lost wage gains to unfair taxes. Reagan fixed this not by indexing wages to inflation but the opposite: capricious tax cuts tied directly to elections. This utterly corrupted our political system. When this tax cutting was coupled with the Federal Reserve releasing huge waves of credit via cutting interest rates below the rate of inflation at key moments to jigger the electoral cycles, we got the recipe for disaster. The Democratic Party that controlled Congress forced Reagan's VP, Bush, to raise taxes. The GOP gleefully went out and blamed the Democrats for a classic recession which was caused by higher oil prices due to Gulf War I.

All our bouts with hyper-inflation or recession of the last 35 years have all be very much related to oil price hikes due to internecine wars in the Middle East. Instead of recognizing this and preparing to hedge against this obvious periodic hazard, the US media, an army of deluded economists and our political leaders all have united in an effort to minimize the connections tying our economic woes with wars in the Middle East. They all can't drive us into these wars if we become aware of the true price we pay.

So here we are, at the very end of this process of delusion, deception and tom foolery: our Congress has given up even the pretense of reasonable rule and are simply going mad. They want to spend money like there is no tomorrow. The unity we are seeing reminds me of when the lights went out in NYC back in 1977. I was living in the middle of the slums in Coney Island. It was a very hot, humid summer night. I was sitting on the third story deck, counting pennies. HAHAHA. Yes, seriously. Counting pennies. My husband was watching a Yankee game on the little black and white TV we owned.

I looked to the north and saw a really nasty lightning storm. 'I wonder if Thor is going to visit us tonight,' I said. My husband laughed. It was far away. Then I saw a series of four very powerful lightning bolts hit something up in the Bronx. 'I wonder if it hit the Con Ed power station there?' I said.

Then I stood up. 'Look, David! Upper Manhattan has disappeared!' I yelled. Then all of Manhattan vanished into the dark. Then parts of Brooklyn. 'Hurry, get the flashlights!' I yelled as the lights went out.

For a few minutes, people were yelling and even laughing as they groped in the dark. Then candles were lit and flashlights shone out of the gloom. Then a window was broken. Within about 20 minutes, the breaking of glass became a frightful symphony of brittle brilliance punctuated with shrieks and howls. 'I need a gun,' I muttered as I marshalled the people in our building into one apartment which was ours for I had water, candles, etc.

Then the first glimmer of red fire. One after another. In another hour, Coney Island was ablaze. There were no police, no one to save us. I and two men got up on the roof with hoses to prevent our building from going up in flames as everything was now blazing away. The shrieks and howls below were hideous as frightened people fled their doomed homes. All night, the fires raged and the riots continued.

Daylight, I thought the National Guard would save us. It was never even called! The mayor later boasted that he didn't harm hardly anyone during the riots! Well, our neighborhood was DESTROYED. I was nearly killed! Instead, the next day, the riot continued. It was a grim business, trying to stop it. The lawlessness this spawned tormented us for a year. Contemptuous youth who thought they had the upper hand made life miserable for all of us and crime shot through the roof. This is why I was forced to launch a street patrol.

Things get out of hand easily. Humans are prone to riots. Release the controls and they go nuts. So it is with Congress: corruption was allowed to flourish. People in our government got away with not representing the will of the people but rather, used corrupt money to run TV commercials filled with lies, expert visual games designed to get people to ignore reality. Misleading, misguiding and in the end, openly looting the people: this is what is going on now. When Congress voted again and again to fund and follow the Vietnam war while not raising taxes, they sowed the seeds of hyperinflation.

The oil embargo fed the fires of inflation that already were raging. Instead of dealing with the reality that the US had hit the Hubbert Oil Peak and was now consuming more than we were producing, the US allowed inflation to rage instead. Instead of killing inflation, this was encouraged by tax laws that penalized people even as they tried to struggle ahead of inflation. My generation was forced to work while raising small children. I had to juggle family and work while grinding my teeth over inflation that seemed always to race faster than my ability to generate enough money to keep the family from falling into the hole.

Today, the fixes the US chose are now coming home to destroy us. Even today, no tax is indexed to inflation. The fad for cutting income taxes has simply transfered the costs to property taxes which have soared and to the hidden tax that we are handing off to our children. Any accountant can tell us what is wrong and how to fix it. But this is not pleasing. For voters now expect tax cuts as part of the election packages along with wild spending. Even as Palin tries to pretend she, running an oil-soaked state that is profiting tremendously from high oil prices, she is really a fiscal hawk who doesn't want handouts from DC. But this is, like much of our politics, a total lie.

The poor voters don't know what to make of things. Even after the media and virtually all of our ruling elites screamed at us that we need a trillion dollar bail out bill for the bankers, this is tremendously unpopular. So the Washington Post today has to pretend this is healthy bipartisanship and not unhealthy corruption. I will note here that at no point, has either the NYT or the Washington Post mentioned the fact that all the leaders in the House and the Senate are totally owned by the same bankers and investors who are being bailed out.

The arrogance of these media outlets! It is very simple to find this information. It took me about 3 minutes at Google to find the facts! This is deliberate. The US public is being herded even as I watch in horror as lightning bolts destroy the US power plant. I know the lights will go out. So do our leaders. They don't care since they have generators and private guards.

Fed Loans to Banks, Dealers, AIG Soar to $410 Billion

(Bloomberg) -- Commercial banks and bond dealers borrowed $348.2 billion from the Federal Reserve as of yesterday, an increase of 60 percent from the prior week amid a worsening credit freeze.

Loans to commercial banks through the traditional discount window rose about $10 billion to $49.5 billion as of yesterday, the Fed said in a weekly report today. The total surpassed the previous record after the 2001 terrorist attacks.

Borrowing by securities firms totaled $146.6 billion, up from $105.7 billion. Under a new emergency program announced Sept. 19, banks borrowed $152.1 billion as of yesterday to buy commercial paper from money-market mutual funds, more than double a week ago.

This is that damn window the Fed created last November. The one they claimed was a test, a try to see if it might work in some hypothetical emergency. The top banking gnomes all lined up to get a token amount to see if this would 'damage' them. They didn't say how this bizarre business could cause pain. They hurried to the mikes to announce that there was no emergency, this was all in fun. HAHAHA. I was very grim and said, they were all lying. And they were. Not that any of this is mentioned in any articles talking about this mess.

There is no banking system anymore. We have the fiction of one. This faux banking system is based on no capital, no reserves. Now, even the Federal Reserve really has no reserves. This across-the-board bankruptcy will hammer the populace soon enough. The trick Congress is pulling is simple: they are now the bank. Only they are bankrupt. This horrid fact is ignored. Because we still don't hear screams and see fires is only because of time: it takes time for the blackout to spread and then the riots to follow. The fact that the military is openly preparing for mass hysteria and maybe even riots, is obvious.

But despite this, they are NOT preparing to patrol our cities properly. Just like at the end of the Vietnam War, we were still patrolling the entire planet but not Coney Island or much of Brooklyn. We were left on our own, to die if we couldn't flee the fires. So it is with this bail out bill.

Bond Dealers Ogle Spreads in Trading Off Wall Street

(Bloomberg) -- The biggest disruption in corporate bonds in three decades is turning into a gift for Jefferies Group Inc. and Mesirow Financial Inc.

Jefferies, a New York-based brokerage that specializes in mid-sized companies, and Mesirow, a so-called regional dealer based in Chicago, haven't incurred the mortgage-related writedowns causing bigger rivals to collapse. They are signing up staff from firms, including Bear Stearns Cos. and Morgan Stanley, to trade more of the $16.5 trillion market for corporate, mortgage and municipal debt.

``I've never seen anything like this,'' said Mesirow Chief Executive Officer James Tyree, 50. ``This is one of the times in history where you can attract dozens'' of new hires.

The companies see potential profit in the widening gap between sellers' asking prices for securities and what buyers wish to pay.

Buyers rule in all down markets. They can't be ignored. And who on this planet will buy our housing debts if our cities begin to burn? For they will burn if this downturn gets nasty. For already, NYC is being defunded just like in the 1970's. All cities will be forced to cut fire, police, schools, road repairs, maintenance, courts, everything. I used to get a great crowd response when I said, 'The only government project that is ahead of schedule is deferred maintenance: everything is breaking down faster than scheduled!' The banking bail out bill won't fix this. It may capitalize banks but I doubt it will be faster than inflation eating the value of mortgages and loans!

Worse, the mortgages on buildings burned down in vast riots will be worth $0 and these losses will accelerate the collapse. The government hopes to somehow, keep families in homes they can't afford. But this isn't the problem. The problem is, families will be stuck in homes where there is no services, poor policing and grave dangers from burning down in riots. And not be near jobs! People will abandon them just to get away from it all. This is why these stupid financial games are not easy to undo. There is no magic wand one can wave to fix these messes. The consequences are set in cement and have to work themselves out, no matter how violently.

Libor Soars, Commercial Paper Slumps as Credit Freeze Deepens

(Bloomberg) -- Interest rates on three-month dollar loans rose to a nine-month high, short-term corporate borrowing fell by the most ever and leveraged loans tumbled, exacerbating the credit freeze that's paralyzing businesses around the world.

The London interbank offered rate that banks charge each other for loans rose for a fourth day, driving a gauge of cash scarcity among banks to a record. The biggest drop in financial short-term debt outstanding since at least 2000 caused the U.S. commercial paper market to tumble 5.6 percent to a three-year low, according to the Federal Reserve.

Interest rates were ridiculously low for the last 10 years. Ever since Japan began its bizarre and utterly ahistorical 0% or slightly higher rates, the entire planet got awash in a splendid sea of red ink. And this is now ending since we can't go above 100% in debt. The US has a 0% savings rate overall and this is pretty much our upper limit. The central bankers have struggled mightily not to attract savers but drop rates lower than inflation! This bizarre, stupid and dangerous remedy has caused the present collapse.

I firmly believe that banking is run by natural systems that can be violated or manipulated...but only temporarily. Just as we can hold our breaths or stand on our heads temporarily, we have to breathe or stand upright eventually or we die. So it is with banking. Right now, we want to keep the lending spree going despite the fact that this system is utterly unsustainable. Instead of seeking out the rules of natural banking and adhering to them, we are seeking ways of VIOLATING these hard rules! We can't even agree on the existence of these natural laws.

Just like the debate about creation and evolution: people want to believe in fantasy no matter what. For spurious reasons. They can do this quite doggedly. But if they are running any sort of system, this can be fatal.

Short-Selling `Math Geek' Not Naked, Covered in Blame

Wall Street chiefs blame those who sell borrowed stock and profit when prices decline for driving shares down as the credit crunch unfolded. After wagers against Morgan Stanley, Merrill Lynch & Co. and Citigroup Inc. surged to records, the Securities and Exchange Commission last month banned short sales of almost 1,000 companies. Paschke says that was the wrong move.

``The whole witch hunt is unfounded and it's frustrating,'' said Paschke, a father of three, in Leuthold's 46th floor offices overlooking the Mississippi River. ``They're changing the rules on the fly, so for those of us that make our livelihood in this business that becomes a very, very difficult proposition.''

Moreover, the ban may prolong the downturn by propping up companies that borrowed heavily and took on too much risk, he says. The Grizzly fund has returned 41 percent this year. Through August it almost tripled the average gain for hedge funds specializing in bearish bets. Paschke declined to identify any companies his fund shorts.

Passing laws that forbid free market actions is a temporary fix that simply makes things worse. Companies deep in debt were the exact same ones that soared in the last 4 years. The Dot Com crash was fixed by flooding Wall Street with unnecessary lending and this, in turn, left a legacy of debts that become fatal if we get into a depression cycle! So the Fed and our insane government are desperate to cause inflation. It is cheaper paying off these debts if there is inflation. And inflation is like the fires of that 1977 riot. Businesses will be looted and homes burned. Literally.

Buffett: Bailout may not be big enough

(Fortune) -- Warren Buffett said Thursday that it is crucial to the global economy that the controversial $700 billion Wall Street bailout passes and that the pricetag may have to rise to do the job right. "If we don't get it [the bailout impasse] solved next week I may go back to delivering papers," he said.

He said that the bill that passed the Senate Wednesday evening isn't a perfect bill, but that it's crucial to stop the global economy from grinding to a halt. He then warned it will take a while to work and that the economy is going to struggle even with its passage.

The global economy is 'grinding to a halt' because it has been mostly focused on flooding the US with manufactured goods and oil. Both are now faltering because the US public is too deep in debt to afford to play 'global consumer' much longer. Flooding the world with more credit will only make this worse, not better. The more Congress 'rescues' us by overspending, the worse things get and the more likely we will have a hideous depression similar to the ones spawned by WWI in Europe.

Rescue the Rescue

By THOMAS L. FRIEDMAN

I totally understand the resentment against Wall Street titans bringing home $60 million bonuses. But when the credit system is imperiled, as it is now, you have to focus on saving the system, even if it means bailing out people who don’t deserve it. Otherwise, you’re saying: I’m going to hold my breath until that Wall Street fat cat turns blue. But he’s not going to turn blue; you are, or we all are. We have to get this right.

My rabbi told this story at Rosh Hashana services on Tuesday: A frail 80-year-old mother is celebrating her birthday and her three sons each give her a present. Harry gives her a new house. Harvey gives her a new car and driver. And Bernie gives her a huge parrot that can recite the entire Torah. A week later, she calls her three sons together and says: “Harry, thanks for the nice house, but I only live in one room. Harvey, thanks for the nice car, but I can’t stand the driver. Bernie, thanks for giving your mother something she could really enjoy. That chicken was delicious.”

Flat Earth Friedman is possibly the biggest fool at the NYT and there is a lot of competition for that prize. The dead parrot is the banker. We CAN punish them by chopping heads off and eating them. No matter what talk they can chatter. How are we going to 'get this right' if there is no punishing the guilty parties here? After the riots slowed down somewhat, the mayor said he didn't want to punish anyone. A riot is a riot!

Well, step by brutal step, we had to punish them! One family who became very bold about crime afterwards, when we all took them to court for stealing car batteries repeatedly on our block, we said to the judge, 'They looted stores during the 1977 riots [this was in 1982]. Put them in jail!' And the judge agreed to our great delight. It was sad, watching the degradation of the children who were allowed to steal from stores that one night. They got little happiness from earning money and then spending it. The temptation of looting was always there, buried in the soul. The main delight was from stealing, not working.

Undoing this ethos was very hard. This is why the bankers won't be reformed even slightly if we just bail them out! They MUST be punished and punished with a fair amount of severity. Ditto, Congress. Only we are too distracted to punish them. They just roll onwards, oblivious to how their looting sprees are destroying our nation.

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