Bankers Need More Capital...From Communist China

May 15, 2008

Elaine Meinel Supkis

As Bernanke seeks to fix the banking collapse, he falls into the trap of treating the obvious 'symptoms' while totally ignoring the underlying problems. This is because he is a tool for the very rich, not a guardian of our joint welfare. This disassociation of the ruling elites from the masses is very profound and dangerous. And this fool actually thinks, if only he can restart the lending machine, this will fix a bankrupt economy. This delusion is cultivated by our rulers who are all spendthrifts who make huge profits off of shoving us into their traps which are set by lending us money they make out of thin air. Even as the magic window the Fed set up last November lends Funny Money™ like crazy, all the top bankers in the West are yelling, 'The crisis is over and all is well and please lend money...after everyone gets some capital!' This is impossible. We don't have no more capital, dudes. We are bankrupt.

Bernanke Urges `Hunkering' Banks to Raise Capital

Federal Reserve Chairman Ben S. Bernanke pushed banks to keep raising capital in the aftermath of losses from the credit crisis, so lenders can avert deeper damage to the U.S. economy.

``Firms are hunkering down,'' Bernanke said at a conference in Chicago today. ``They have at least partially replaced the losses with new capital raising, but not entirely. They are being rather conservative in making new loans, which has implications for the broader economy.''

Bernanke's remarks reflect concerns he and other Fed officials expressed this week that financial markets have yet to return to normal. The Fed chief also said the central bank is considering strengthening its guidance to banks on how they manage risk after ``weaknesses'' that contributed to the crisis.

Banks and securities companies have raised about $244 billion of capital since July, after writedowns and credit losses in excess of $333 billion. Bernanke and Treasury Secretary Henry Paulson have repeatedly said firms should keep increasing their funds, seeking to alleviate the impact of the credit crunch.

``I strongly urge financial institutions to remain proactive in their capital-raising efforts,'' Bernanke said in the text of his speech. ``Doing so not only helps the broader economy but positions firms to take advantage of new profit opportunities as conditions in the financial markets and the economy improve.''

Time for the old calculator: $333 minus $244=$89 billion in the red. This was after the Asian and Arab sovereign wealth funds poured many billions into the big investment banking houses in the West. Did any of these SWF investors see any profits from all this? No...? Heh. Not a penny. They did this because they have definite political reasons for taking over control of our banking systems. These reasons are not benign, either. They are hostile take overs.

For two years, I have written about Sovereign Wealth Funds. The word 'sovereign' is very important: it means it is lord over all others. In the case of our banking businesses, all of which are essentially bankrupt, they survive with massive losses, only thanks to the intervention of these kings, in many cases, quite literally kings. The US is supposed to be this fabulous, sovereign nation that is powerful and is a democracy or a republic, not a slave state or beggar at the gates of the Dragon Palace, the emperor, Hu. Just like Bernanke seldom mentions our trade deficit, so he doesn't muse about this collapse of US sovereignty in the banking system.

So what exactly does this TRAITOR mean when he says, '...remain proactive in their capital-raising efforts'? First, one of the places these pathetic fools who screwed up our banking system to the point of bankruptcy, is to go to China and ask to be bailed out. This is obviously impossible not to mention, insensitive and outright deluded. Bernanke made this speech after the Great May Quake! Perhaps a hundred thousand Chinese lie dead! And at least 5 million are without shelter, water, food. China is going to turn inwards and use what wealth they have accumulated to save their own people! They will not be building more houses in America. They will be building...in China!

Indeed, one of the problems for the US is that China has been slowly turning off the financial taps. The US insists that China not export to the US so much anymore. And this means, the Chinese won't lend us money. If China does have money inside our financial systems, they will use this to funnel more money into rebuilding China. This effort has high support within China. The earthquakes have increased the sense of unity and patriotism within China.

Then there are others who have been keeping the US banking system from declaring obvious bankruptcy: the Arab sheikhs and kings. It is obvious, after US candidates for President and Bush in Israel have delivered blood-curdling speeches aimed at the heart of Islam. I also find it rather horrible that the financial affairs of many of our top politicians in both parties have grown massively by hundreds of millions of dollars in the last 10 years even as our entire banking system which is regulated by these same TRAITORS collapses into bankruptcy and dependency on foreign powers. Someone has been stuffing their own piggy banks while stiffing the US public. Neither party mentions any of this for obvious reasons. Just like Bernanke conspires with them to not mention our growing budget deficits.

Also, Bernanke betrays his doctrinaire refusal to understand capitalism. He thinks, if the bankers just somehow get some money from other nation's trade profits, we can resume racking up more and more debt via the magic of lending! The efforts of 50 years of business schools in America wiping out all traces of Marxism has led to this sort of childish thinking about capitalism. This is why policies that kill the Golden Goose, namely, the working class, are encouraged and justified even as it is obvious to anyone, if you destroy the incomes of workers, capitalism falls off a cliff. Chinese labor can gain value-added profits only if it sells to US workers who have greater incomes. Once all workers are reduced to semi-slaver, the market for manufactured stuff collapses. This is what we call 'depressions.' Bernanke also believes that if we have a depression, it is easily fixed by debasing the currency. Then prices go up and voila! No depression!

But this works only if wages rise rapidly, too. And while the take home money for our own work force has been relentlessly falling, the consumer base is rapidly vanishing in this sector. So why would the Chinese pour more of their CAPITAL down this well? In all the statistics about wages, we forget the huge change in US working relations: the push to drive all women, even ones with small babies, into the workforce. This gave double incomes even as each individual income fell, the collective family incomes shot upwards for 25 years. This is now over and done with. There is no untapped labor left except for one: child labor. Like in any third world country, this is one frontier the US consumer nation dare not cross. I even saw, at the Mises Organization's blog, a story lauding child labor and demanding a return to this noxious, deadly abuse of our own offspring for capitalist exploitation!

Chinese children are not set to work! They work hard...at school. The tragedy of the Chinese earthquake is how many schools collapsed due to being built with nearly all cement. But our own children are caught in a collapsing school system only it isn't the buildings. It is the system itself. This is leading towards the dire last step in exploitation of labor: child labor.

Confidence Improves Amid Signs Credit Crisis Easing

Confidence in the global economy improved for the second consecutive month in May on signs the worst of the credit squeeze may be over, a survey of Bloomberg users on five continents showed.

The Bloomberg Professional Global Confidence Index rose to 22.7 from April's 14.5, with respondents becoming less pessimistic in every region. A reading below 50 indicates negative sentiment. The measure fell to as low as 13.1 in March.

``Conditions are not quite as jittery in markets as they were, so we may be through the worst,'' said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London, who took part in the survey.

Participants in the U.S. and Europe reversed their predictions of a dollar decline after the Federal Reserve indicated it's ready to pause cutting interest rates. Wall Street chief executive officers including Jamie Dimon of JPMorgan Chase & Co. said in the past month that the credit crunch is easing.

The global economy is having some difficulties due to the reliance on the US consumer markets and US rising debt to fuel a transfer of sovereign wealth via commodities sales and manufacturing profits moving out of the US and over to other nations. Absolutely everyone who produces anything has flooded into the US markets to exploit US easy lending. Since the US never had to really trade for anything, this lending is the entire basis of our economy. And it is why our banks are bankrupt. Fixing this means fixing global excess exports to the US. And the tiny change in status this last six months has barely undone any of the past damage in trade. Even as the weak dollar boosted US trade profits slightly, the pit we are in is very, very deep. The improvements, nearly microscopic. And thanks to all our trade partner's efforts, the dollar is now stronger so this improvement is now gone. Dead in the water.

'The worst...' the Royal Scottish banker was talking about is the bad times when US exports began to rise and the world's imports to the US dropped. Now, it is back to normal. But 'normal' is utterly abnormal. As well as unsustainable. And the 'credit crunch' is when easy lending stopped and wild US consumer spending slowed down. Now, it resumes? Based on sub-inflation credit? Which means, lending is cheaper than earning? And how is this sustainable? And how can this Funny Lending™ create anything except hyperinflation?

Food Prices See Greatest Monthly Increase in Nearly 20 Years

Food prices have risen 6.1 percent in the past three months on a seasonally adjusted annual basis. The one-month rise between March and April of 0.9 percent was the biggest since January 1990, according to the Bureau of Labor Statistics.

The rise in prices covered all categories of food but was most severe among such staple goods as grains and oils -- goods where inflation has touched off food riots in some less developed countries and led to concerns about supply shortages.

Say hello to hyperinflation, coming to a store near you! Sigh. Again: Bernanke and the Scottish banker don't dare utter a word about this inflation! They focus only on making loans available somehow. This is ridiculous when we see China trying to suppress inflation the old way: increasing, not decreasing, the reserve ratios for lending, increasing the interest rates.

U.S. Economy: Manufacturing Struggles as Expansion Falters

The slump in U.S. manufacturing deepened while the economy skirted recession, reports today showed.

Industrial production declined 0.7 percent in April, the Federal Reserve said in Washington today, more than twice the drop forecast by economists. Separate figures from the New York and Philadelphia branches of the central bank indicated the slide may continue this month.

Only exports and consumer spending, the largest part of the economy, are keeping the six-year expansion alive as housing shows no sign of a rebound and factories retrench.

``There is no question about whether or not there is a recession in manufacturing -- there is,'' said Michael Gregory, a senior economist at BMO Capital Markets in Toronto, who correctly anticipated the drop in industrial production. ``Housing is in deep recession and manufacturing is in a shallow one.''

For the last 9 months, the dollar has fallen greatly against the yen and other major currencies with nations we have trade problems. Few Americans know that Europe has a huge trade advantage with the US despite the euro! But it was edging downwards in our favor until three weeks ago. Then the G7 nations, especially Japan, howled about the weak dollar and up it went. To the great satisfaction of our trade partners who wish to resume driving us into bankruptcy while they make great capitalist profits off of trade with us. The manufacturing sales from the US will now begin to vanish and we will be worse off than last year which saw nearly a trillion in trade deficits. This is why I support tariffs and barriers. Relying on monetary manipulations to control trade is an obvious, total failure for the US.

Rochelle Parker needed money for Christmas gifts and medicine, so she went online and found a Web site promising easy money. After a few key punches she was zapped a $300 loan, but one that charged an astonishing 842 percent annual interest.

The recently retired fingerprint technician for the Chicago Police Department had several other online loans that drained her financially and forced her to move in with her daughter. But getting another loan was so easy on the Internet.

"As my mother said, I'm robbing Peter to pay Paul," Parker said with a shake of her head and a sigh of regret.

Usury stalks the working classes as many in this sector go bankrupt due to loss of income caused by Bernanke's helicopter drops to keep insolvent investment bankers happy and the many multimillionaires in Congress rolling in dough. No sane person signs up for this sort of loan except the most desperate of all. A simple law passed by our multi-millionaire Congressional leaders and signed by our multi-millionaire President could fix this. But instead, they passed the odious 'Bankruptcy Laws' that made it nearly impossible for the hard-pressed workers to get rid of past debts. So we get a working class sinking into debt-slavery and no one is rescuing them. And inflation caused by debasing the currency is worsening things.

Sears majesty to hedge-fund dust
By Julian Delasantellis

To this observer, the sorry saga of Sears illustrates just how far distorted American ethics and values have become from exposure to the great credit and money carnival of the past few years. "All that is solid melts into air, all that is holy is profaned," Karl Marx wrote in 1848. In this case, nobody thought twice, nobody blinked an eye, when Wall Street took a truly unique American institution, Sears, and turned it from a fine, respected American society matron into a common streetwalker reduced to pimping through the night for Eddie Lampert.

Last year, the New York Times' Gretchen Morgenson noted that more American national income was produced by financial engineers, people like Lampert who manipulate the amorphous abstraction called money, than by the mechanical engineers who manipulate actual physical realities such as steel, concrete, mortar and oil. In his new book Bad Money (reviewed May 10 by Joe Costello), Kevin Phillips notes that "By 2004-6, financial services represented 20 to 21 percent of gross domestic product, manufacturing just 12 to 13 percent."

Somewhere along the line, America got the idea that the buck generated from financial services, from manipulating money, from passing it from hand to hand, was equivalent, or even superior to (after all, you come home with a lot better smelling clothes after a day on the trading floor compared to a day at the steel mill) the same buck made actually making and sustaining something - such as the great brand Sears once was.

The Asia Times has some of the very best economic articles. Compared to other mainstream media like the Wall Street Journal or the New York Times, the opinions in the Asian Times is often enlightening and well-written. Note how Julian even quotes...heh...KARL MARX! GE, like Sears, was turned into a hedge-fund banking entity that was looted by the top brass. GE is now selling off its actual manufacturing to...CHINA. And then there is GM: they became a lending institution and that is now bankrupting them as Toyota beats GM's pants off in international trade PROFITS. Up and down and all around, our manufacturing base has turned into a Mafioso-style lending machine that strips workers of all future earnings.

And the poor woman in the story about usury: she did this to buy presents manufactured in China for her sad family. So they could be entertained to death. I have said many years ago, Xmas should be banned. It is destroying our nation, distorting the business cycle and wrecking our environment.

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Comments

[mad mike]

wacky berannke isnt a tool of the rich, he is the rich exploiting gov-ment service for himself and his buddies.
wacky bernanke, punky paulison and creepy corzine all have invaded the public sector to engage in largess on their own behalf.
i might have mentioned before. corzine wants to shut state parks in the great state of new jerky, but his ex gold-man-sacker buddy dan gets a 2 million dollar contract with the state.
should bernanke be allowed to let gold-man-sacks use the discount window at the fed? talk about blatant fraud. in china as in the usa there are two types of citizens, those with perks and priviledge and those without.
there are lots of children working in factories. but those with money and connections go to schools. and we cry for those that get squashed in earthquakes and ignore those who die a little every day in some factory. some schools are really factories. a fireworks factory blew up a few years ago. turns out it was kids in a "school". there is one thing they do different in china. they grab those fuck up exploiters and execute them. here they get medals of freedom or cushy jobs as consultants. cripy whitman another ex gov-ner of that great state of new jerky raided a billion dollar pension fund, went to d.c. told everyone air at the smoldering ruins of the world trade center was safe
and gets a shyster judge to rule that no one would enter public service if they were held responsible for lying to the public!
send them all to gitmo,Q-ber and waterboard them all.
the man enslaved to wealth can never be honest.
there is no limit to human greed and folly.(tm)

[Ed-M]

Elaine, you'll love this tidbit from Reuters... basically it's a load of rubbish from the Jaded Pirates Morgan about their *entree* into trading of actual petroleum.

http://www.forbes.com/reuters/feeds/reuters/2008/05/14/2008-05-14T133826Z_01_SP148501_RTRIDST_0_JPMORGAN-COMMODITIES-INTERVIEW.html

SINGAPORE, May 14 (Reuters) - JPMorgan Chase (nyse: JPM - news - people ) & Co will begin trading physical oil by year-end, increasing its exposure in a market that could rise to $200 a barrel, the bank's global head of commodities said on Wednesday.

The bank plans to expand in commodities and energy trading, Blythe Masters said, despite expectations of job cuts in other areas as it prepares to take on staff from Bear Stearns (nyse: BSC - news - people ) at the same time it deals with turbulent financial markets.

"We will start trading in physical oil and refined products by the end of this year," she told Reuters in an interview.

START trading?!?!? Greatly expand trading, more like. And making a killing. While they drive oil prices to $1,000.00 a barrel and bankrupt everybody else in the process.

May their derivatives bring them to a bad end.

[Elaine Meinel Supkis]

Next they will announce they plan to corner the rice and noodles markets.

[Anthony]

They gonna get burned big time. There is a reason why OPEC is there.

Crude oils market is not really "free market" It is highly controlled. the producers are few and the distributors are even fewer. There are bunch of guys with computer monitors buying and selling stuff, but they are really meaningless when right down to it.

JP morgan is going to go the way Enron does in a few years. They are not in control whatsoever. (enron had to hide loss, because they thought they know gas and oil market, btw.)

[Elaine Meinel Supkis]

You are probably right.

[Michael]

DR. STRANGEBEN, OR HOW I LEARNED TO STOP WORRYING AND LOVE INFLATION

"Experience since the mid-1960s shows that massive government deficits and Federal Reserve lender-of-last-resort intervention increase the robustness of the financial system. That is, in the modern economy the job that was [formerly] done by deep depression can be accomplished [now] without the economy going through the trauma of debt deflation and deep depression. However, the government deficit and lender-of-last-resort interventions that abort the consequences of fragile [leveraged] financial structures lead in time to inflation. Inflation enables firms, households, and financial institutions [and governments] to fulfill [debt] commitments in [plentiful] dollars that they could not fulfill at stable prices." - Hyman Minsky

Let's add to the benefits of dollar inflation that the inflated dollar drops in FX value, making imports less expensive and reducing the trade deficit. It's naive to be shocked that Ben & Co. are willing to inflate our currency; hell, you know they are intentionally inflating it. The only possible downside from their point of view would occur if either a) Everybody holding Treasuries started dumping them and didn't stop until they were worthless or b) Inflation got so bad (say 1979 level) that somebody had to bite the bullet (a la Volcker) with 20% interest rates to correct it. Well, if you understand that it is now the absolute GIVEN at every level of our society (including the Fed) that the U.S. Government will never pay off its national debt, you must understand that it is now the absolute GIVEN that no one will abandon Treasuries ("they're the modern bullion of the world trade system"), and it is now the absolute GIVEN that world deflationary forces will prevent 1979 from happening again. This latter given is made possible by assuming that commodities inflation is just another asset bubble waiting to pop. So, all you have to do to stop worrying is enter the magical world of the Fed, put your faith in their GIVENS, and smile at the upside of inflation.

[Michael]

Sorry, I see a typo - the inflated dollar makes "exports" less expensive, not "imports'.

[Bear of Little Brain]

Michael:
Nice headline, but don't follow your logic, unless you are being deeply ironic.
If the US will not pay off its debt, will it attempt to pay it down? And how? With a strong currency? There are no indications that I see of that returning any time soon. If it will not pay it down or off, it is unlikely to maintain a steady state condition. Hence, greater debt. Once others judge that the policy is not to pay it off or down with strong dollars, but with devalued dollars or not at all and so increase debt endlessly, the game is to get out of dollar holdings before the next guy and before the panic, or at a time chosen by the holder. This is not compatible with "the absolute GIVEN that no one will abandon Treasuries". If you remember, when Bush publicly humiliated the Chinese leader in Washington a few years ago, in the usual exchange of gifts, he (Bush) was presented with a copy of "The Art of War", a Chinese classic. Don't be surprised if there comes a time when the Chinese, the Japanese, the Russians and everyone's uncle pull the plug on the dollar at a time of their choosing. It may even be coordinated. The New World Order may not be quite what the Neo-cons expected! The world is regrouping and the dollar is becoming marginalised. You say that Treasuries are "the modern bullion of the world trade system", but that is less and less the case. I imagine the gold price may be a good indicator of the faith in US Treasuries.
Re-reading your last comment, "smile at the upside of inflation", makes me think you must have meant this as irony. If so, and I just haven't got it, then "nice one". I fell for it.

Just as an aside, Bloomberg UK reported that a meeting has just taken place between ministers from the BRIC countries. Russia, India, and China were the main participants, but the Brazilians were also invited to attend, which they did. I didn't hear all the report, but they all seem a bit miffed with the US for its constant criticism of human rights (pot, kettle, black?). They are meeting again next year. Looks like the inhabitants of all Asia are closing ranks against the attempts by the Western Powers-that-be to continue "The Great Game".

[calvino]

Papa Marx? Now I see how you got yourself banished. It's like bull baiting to the summertime patriots, gets them foaming at the mouth every time.

[Bear of Little Brain]

Latest hubris: Democrats want to make $20Bn arms contract with the Saudis dependent on lower oil prices.

1. Maybe the Saudis don't need the weapons anyway, but see it as a way of giving Americans jobs.

2. I imagine Chuck Schumer hasn't seen the videos of the latest Russian fighter planes, or been told about the deadly Chinese Silkworm missiles. Having weapons not used by the Israelis could have advantages.

Self. Shoot. Foot. Off topic, but still part of the puzzle.

[Elaine Meinel Supkis]

Saudi Arabia and China: today's topic. Interesting news there. News Americans should fear.

I wrote very extensively about the Hu visit, its implications and made accurate predictions. Bush was an arrogant, stupid fool and we will pay dearly for all that. As usual.

The US media continues to be very sly about China and instead of praising the hard, heartbreaking work of the Chinese in their rescue operations, they make all sorts of horrible, snide comments. I can barely bring myself to watch. Not one news media brings up New Orleans and contrasts the vicious refusal to aid black Americans when they were dying slowly, en mass a la Burma.

[andrei]

Elaine, until now I thought your vision was the most gloomy one. (discarding the nuts on the net)

Not anymore.

http://www.lifeaftertheoilcrash.net/

[Ed-M]

Elaine,

In my town the only PBS affiliate showing the BBC World Service cancelled it for basically a show about local "fashion" and local "hip culture" to catch that twentysomething market. In other words, something unwatchable. Now all we have left here is the Lehrer News Hour, which puts me to sleep, and the silly rubbish put out by the corporate media.

At least the corporate media temporarily redeemed themselves and SHOWED the suffering in New Orleans, forcing BushCo to actually do something and get those people out. If BushCo were to do Katrina all over again, they'd declare martial law and impose a media blackout from day one, so that noone would find out that people were starving a la Myanmar.

[Elaine Meinel Supkis]

Yes, the resemblance with Myanmar is absolute. Bush wanted to clear out New Orleans and his buddies even boasted, before the damn hurricane, this would be the best way to do Urban Renewal!

[Paul S]

Plenty of 'hubris' in DC to go around. I do not believe one party has a monopoly on arrogance or ego. The 'hubris' of those in Washington DC is caused by WAY too much inbreeding. As I've said before the gene pool of the country folk you saw in the movie "Delivereance" is HUGE compared to the gene pool in DC. Too many folks in Washington DC have this "Masters of the Universe" complex. These arrogant fools are going to drive the WHOLE country off the cliff and never stop thinking that being the ruling class is their God-given right. (Like the 'divine right of Kings'. So much for the concept of democracy.)It is going to take outside intervention to cure what ails Washington DC. Some members of Congress and those in the media may need to be euthanised.

[Michael]

Bear,
Yes, I intended irony. I don't accept these polyanna GIVENS (I'm a Murphy's Law, Chaos & Complexity Theory, 2nd Law of Thermodynamics type guy). But, it's important to understand that Ben and Friends do hold fast to these GIVENS and are not preparing for alternative possibilities. They know these things can happen, but must assume they won't. Why must they? Because if they don't provide bailouts and low interest rates (as all central banks do in credit bubble crises such as we are now experiencing) there will be a credit collapse and HUGE DEFLATION worse than the Great Depression; they will avoid this at all costs and happily inflate away believing that is part of how you prevent a credit collapse. Besides, they figure they'll "save" the world from the Great Credit Disaster now, and someone else can jack up interest rates later if inflation gets real bad (which it might). I personally believe the foreign governments who are holding devaluating Treasuries are doing so only because there is no other currency yet ready to replace the dollar internationally (and probably won't be during their tenure in office) and no single government whose redemption guarantee is based on as strong and stable an economy as the U.S. Yet. But I know that the run on the dollar and the dumping of Treasuries could start at any time for any reason, and that would be a disaster that would make the Great Depression look mild. So, I can understand why in order to sleep at night the Fed has to act as if these things will never happen and promote a deflationary status quo as a set of GIVENS.

[Bear of Little Brain]

Michael:
Don't expect you will see this, since I'm revisiting this post on Saturday, and you've all moved on.
Phew! Glad I pondered whether you were being ironic or not. Sorry not to have actually realised it, though; I could have spared myself all that typing (I'm really slow).
Hitler had "Mein Kampf", Bernanke has "Inflation: making sure it doesn't happen here". A manifesto is usually an intention.
All the best.

[Elaine Meinel Supkis]

Bear, I check all over the place going way back...heh.

Good comments, as per usual. Great writing, as we fully expect, everyone.

The history of the collapse of the British banking system pre-WWII is very pertinent for us to look at so I will talk yet again about it.

[Royal Dutch]

THE POX ON POLITICS AND EARTHQUAKES
VOTE WITH YOUR MONEY
SEND THIS OUT TO EVERYONE ASAP
http://thisjune5th.com/

[Jim Smith]

"Bear, I check all over place going way back...heh" -- Elaine, you are something else!

[Elaine Meinel Supkis]

Yes, Jim.