Housing Rescue WILL NOT Work At All

July 25, 2008

Elaine Meinel Supkis

We finally open the latest Santa Claus Congress package. It is full of the usual useless stuff. It is really an attempt at turning back the clock. Oh, we so very much want the Free Funny Money™ to continue! Toyota has finally become the world's biggest auto manufacturer. Even if some of these are made by American workers at lower wages than in Detroit, this is not a sign that is good for Americans. Also, the suppression of the commodities markets continues. This is the only way they know that can hide inflation. Desperately, everyone in the US power structure wants to resume asset inflation. This is impossible. Until Americans figure out that cheap lending means economic destruction, we will continue to flap around the flame of cheap loans like a moth looking for sex with candles.

Inflation Outlook Makes a `Bond Bubble' Unlikely, Goldman Says

(Bloomberg) -- Yields on U.S. government debt won't increase as much as some analysts expect because inflation expectations are ``well-contained,'' according to Goldman Sachs Group Inc.

Those who call for a ``dramatic'' rise in yields often point to an increase in so-called headline inflation and household expectations, Goldman analysts led by Francesco Garzarelli wrote in a note to clients today.

Expectations for inflation a decade from now are still below the average since 1997 and aren't statistically different from expectations in the past nine years, said the analysts, drawing on data from London-based Consensus Economics. That undermines the idea of a bond bubble in which prices are too high and yields are too low, Goldman said.

Several things here: Goldman is, like many gnomes, a lying bastard. He can't help this. Note the last sentence here: he is very careful to say that future inflation won't be greater than the average since 1977. I never want to just assert things, I use charts and graphs a great deal and whenever we talk about anything like this, we must rush off to these charts and graphs to see what the truth is and the truth here is obvious: this gnome is comparing a time frame that includes one of the greatest inflationary surges in US history since 1820. This is not a minor matter!

Here is a Federal Reserve graph I heavily amended:

I am looking for several things here. One is the comparison of 30 year mortgage rates to CD values and 6 month Treasury bills. CDs and Treasuries usually track very close together. Significantly, they also diverge. The spread widens at specific historic events. What I was curious about was the harmonic echo of this divergence when the spread between CDs and 30 year mortgages were at their greatest.

Seven times since the Floating Currency was launched, the spread between mortgage rate of return on lending was far greater than previous and following sessions. Twice before the huge inflationary surge of 1977-1982, we had such divergences. In the upper right corner we see these degrees of divergence clearly. The thing to remember here is that mortgages MUST be more then CDs. CDs, after all, are the basis for lending! So interest rates on mortgages should alway rise to be several basis points ahead of CDs which are supposed to be greater than inflation. But the Treasury is controlled by the Federal Reserve. So we can see the Reserve putting on the brakes by raising rates or giving things gas by dropping rates below the rate of inflation.

Trouble comes when the rate of inflation is far ahead of all these rates! In the case of the last 20 years, the inflation rate has been well above the cost of a 30 year mortgage as well as Treasuries and CD which is why the savings rate has utterly collapsed and debts have grown like weeds in a warm summer rain. Note how twice, the mortgage rates were less than other interest rate instruments: in 1975 and the ruinous 1978-1982 period.

Now look again at the green and red bars in the upper right corner: the A bars are similar to the G bars. Namely, at the dawn of the disaster of hyperinflation, the conditions were the same as today. The differential of the post-Volcker hyperinflation surge shows that periodically, the CD/Treasury differentials nearly merged in 1985, 1989 which reminds us this was the Savings & Loan mess, and again in 1992 when rates had to rise rapidly due to Greenspan making money cheap because he wanted to 'stop the recession' caused by the 1989 S&L collapse and Gulf War I. Also note how during the entire Clinton Presidency, the spread between CD/Treasuries and mortgages was much smaller than any of the periods I highlighted here.

The thing to remember here is pretty simple: banks make a lot of money when the spread is the greatest. The periods with the green bars show us when the Federal Reserve politically manipulates the value of the Treasuries by artificially lowering the rates below the rate of inflation. Notice clearly how the Fed panicked in 1975 and in the late 1970's. The rate jerks upwards wildly then they tried to bring it below 10% and then were forced to raise it back up to 18% again. Even after suppressing it below 8%, this failed immediately and it had to be raised yet again to over 12% just one year later! Instead of stability, we see this time frame from 1970 to today as one of greatest instability. And of course, the greatest two spreads are in 1992 and 2003, both period coming right after a recession that the Fed 'fixed' by dropping interest rates very, very low.

These red bar periods represent eras of debt growth. This isn't because loans were so very cheap to customers, it is because it is cheap for BANKERS. They pay very little in interest for money which has to come into the banks to 'capitalize' them so they can lend! We just went through such a 'capital squeeze' recently when the Fed had to raise rates very fast due to rising inflation. This, in turn, causes lending to collapse. When the CD/Treasury rates are higher than mortgages, the housing market collapses because banks go bankrupt. Right now, we can plainly see that the capitalization of the banks has collapsed and they must attract more savings. But instead, the government and the Fed are conspiring to reproduce the mistakes of the 1970s. So they have widened the spread between CDs and Treasuries TO RECORD LEVELS. Note the last green bar on the right! It is double the one at the beginning of the hyper-inflationary cycle of the 1970's!

Back to Goldman Sachs: that guy is insane or a liar. Nothing shows us that inflation is going away in the future. Everything including the news about the latest futile bail out bill in Congress, shows us future inflation taking off like a rocket. Unless we collapse into a massive deflationary spiral which is quite possible. Money can and has, vanished.

The bonds markets have been broiling over lately. There is tremendous chaos building there that the Fed tries to paper over with artificially cheap lending rates from the Mother Of All Inflationary Machines: the US government. The frantic efforts to drive lending rates and the rate banks pay savers downwards show up clearly here. In the 1990's, the spread between Treasuries and CDs was continuous. But during the Dot Com recession, both were identical.

Why is this so? I am presuming tht the Fed and the government both have figured out, after 1982, how to work with bankers to drag savers along and force them to eat inflation. The most recent attempt at this, from 2000 to 2004 was so draconian and nasty, savings in the US simply vanished. The CD markets became a fiction. The price of gold suddenly began its historic climb upwards, rising an astonishing $700+ an ounce in less than 5 years! Look at the 2004-3007 period: Treasuries lagged behind CDs so the Fed dropped the rates at a near-record rate and the spread widens tremendously. There is a battle going on: will savers force the bankers to pay higher CD rates? Will the widening spread between mortgages and rates save the profit margins of bankers?

All this is moot if the housing market dies. And it is still dying.

Bill Gross: The Housing/GSE Bill Is Best Way Out of Credit Crisis

Make no mistake, the current conundrum that must be solved is: how to make the price of 120 million U.S. barns stop going down in price and then to make them go up again...

Up until this point, the joint efforts of the Fed and the Treasury have been directed towards maintaining the stability of our major financial institutions, recapitalizing their balance sheets in “current form,” and lowering the cost of mortgage credit. All are crucial to any solution, but it is this third and last point where markets have failed to cooperate. With Fed Funds having been lowered from 5¼% to 2%, it would have been logical to assume that the price of mortgage credit would go down as well and that the price of homes would at least slow their current descent. Not so... the yield on a 30-year agency mortgage-backed loan has actually risen since the Fed somewhat unexpectedly began to lower Fed Funds in early September of 2007. Add to that of course, the increased fees, points, and total spread that an actual homebuyer pays to finance his purchase now as opposed to then, and it is obvious that homes are not the bargains that starving realtors claim they might be... lowering the cost of mortgage credit via the omnibus housing/GSE bill now placed before the Congress and the President is the best way to begin the long journey back to normalcy.

And off the cliff we fly! Was the recent housing market 'normalcy' or a bubble? This question obviously is not settled in the minds of the money making gnomes. They want the bubble to be normal, I would suggest.

Bill Gross is in great need of being rescued. He makes oodles of money when we have housing bubbles. He is losing money right now and needs more easy lending to boost his SIVS and CDOs and other papers. He wants FREE FUNNY MONEY™ NOW!!! He can't keep his goddess in a glittering cage of gold if he doesn't restart the madcap housing market which is the major industry the US has these days. He mentions 'recapitalizing...balance sheets' but he doesn't care about this matter. If he and his ilk can get their buddies in the Treasury and the Federal Reserve to do this for them, all the better. If they can't attract savings due to fake, super-sub-inflation CD rates then the Federal Government can just hand over Treasuries which are really government debts and voila! The bankers are 'capitalized.' And the taxpayers get a greater future burden on labor.

I also like how Gross says, 'SOMEWHAT unexpected' Fed rate cuts! He and his gang of gnomes all were shrieking at the top of their lungs, 'DROP RATES NOW OR ELSE!!!' They were shouting about how there was BLOOD IN THE STREETS! Now the latest scam is on Bush's desk to be signed. Only now do we learn what is in the housing bill. I am predicting now that it will be a total failure on every level. Every level. It tries to be Santa Claus to the homebuyers but it won't bring any Xmas gifts, I am betting.

Housing Bill Has Something for Nearly Everyone

If you are ignoring the housing bailout bill because you think it benefits only troubled homeowners, you may miss out on a windfall.

The bill, expected to be passed by the Senate in the next few days and then signed by President Bush, does offer incentives to certain overextended borrowers and their mortgage lenders.

But it also includes many handouts to first-time homebuyers, longtime homeowners, returning veterans and senior citizens seeking to tap their home equity without getting hit with big fees. Millions of people have the potential to benefit in some way.

The gnomes want big fees! Minus that, they will be very grumpy. They will....not lend. HAHAHA. The entire point of lending was to collect fees. When this doesn't happen, the gnomes get bored and bothered. They need money, not handing out charity to people who want to bid up the price of hovels. First time homeowners are not the same problem as older home owners: they need CHEAPER PRICES. Not easier lending or easy money with no questions asked. They need lower prices. During recessions, houses get cheaper. I bought after recessions and loved it!

Secondly, this is a classic 'open a hole in the wall of the Cave of Wealth and steal money' scam. Namely, the number of people qualifying for this boon and how it is run will end up becoming a big hole in the US tax code and like the other 'reward debtors and people who never save a penny' scheme. And can our government, running half a TRILLION in the red this year, afford MORE tax freebies???? Of course not!

As always in the last 35 years, the US government ignores budget deficits and merrily hands out goodies! This mentality began under Nixon and got infinitely worse under Reagan. Since Reagan, even in times when we have supposedly no inflation, everyone runs on the 'I'll cut taxes!' issue. I say, why not index taxes to inflation? So people do move into higher tax categories? I suggested this in 1974. Note how this never, ever happens.

Here is an example of the stupidity of this rescue bill:

The bill tries to address both issues. First, it limits origination fees on reverse mortgages at 2 percent of any loan up to $200,000 and 1 percent beyond that, up to a maximum of $6,000.

The bill also states explicitly that borrowers cannot be forced to purchase an annuity or other financial or insurance product as a condition of qualifying for a reverse mortgage.

Finally, the bill raises the maximum amount that people can borrow. Before, the limits were set on a county by county basis, according to AARP’s legislative policy director, David Certner. The biggest allowable mortgage available anywhere was just over $400,000. Now, there is a nationwide cap of $625,500.

Santa Claus is saying to the elders, 'We will INCREASE the amount you can get from a reverse mortgage' and at the same time, sets all sorts of limitations. The gnomes will suddenly see there is no point in offering these things! So they will cease selling them! Then, the US will force Fannie Mae and Freddie Mac to buy these dead beat deals! Note how both FMs ended up losing investor's profits and the stocks collapsing due to the government ordering them to suck up all the big, bad loans of the big, bad bankers? Now, they will have to take on all of the 'reverse mortgage' markets! And then we will again see hovels of various sorts priced as if they were mansions. And then, when the elderly die off, as we inevitably shall, these run down places....the elderly usually do not take care of housing as they age due to many obvious factors, unless they have kids who, like me, come over and fix everything all the time---these reverse houses will hit the market once the elderly die in sad shape!

Indeed, this bill allows the elderly to live in their houses even after they use up all the reverse mortgage. Until they die. Probably, penniless. Will a heir keep up these houses as this happens? NO! Why?

OBVIOUSLY: if you inherit nothing at all, why work to make it better? Why paint it? Why fix the plumbing? Wiring? Why do anything at all? I made money buying houses that were 'used up' by previous owners who fixed nothing for 20 years or more. Then, I rebuild the things. This costs money and time! And I paid little money for these slummy houses! The entire concept of 'reverse mortgage' hinges on one thing: rising real estate values.

This, dear readers, is why everyone is frantic to restart the housing bubble. Nearly all systems were redesigned to operate under bubble conditions. Minus this, the whole thing collapses. Nothing makes economic sense anymore. And of course, restarting this bubble will destroy America.

Foreclosures Double in Second Quarter as U.S. Home Prices Fall

(Bloomberg) -- U.S. foreclosure filings more than doubled in the second quarter from a year earlier as falling home prices left borrowers owing more on mortgages than their properties were worth.

One in every 171 U.S. homeowners lost their house to foreclosure, received a default notice or was warned of a pending auction, an increase of 121 percent from a year earlier and a 14 percent rise from the first quarter, RealtyTrac Inc. said today in a statement. Almost 740,000 properties were in some stage of the foreclosure process, the most since the Irvine, California-based real estate data company began reporting in January 2005.

As the real estate market collapses, we have an excess of NEW houses on the markets, going under. Heaven help us if we get into a market with debt-raddled OLD houses lived in by older people! That is sheer insanity. Normally, even if the heirs don't take care of gramp's house, if grandpa pays off the mortgage, even discounted due to being run down, the heirs still get an inheritance when the old, run down house is sold. But if everything is deep in debt, the banks MUST sell at a profit or they lose the value of the 'reverse mortgage'. Gah! I see nothing good coming out of all of this!

Often, people get started in their own homes or pay off their mortgage when gramps dies and leaves an inheritance! Now, everyone stays firmly in debt, forever? This is BAD, everyone. SOMEONE has to be out of debt at some point or an entire nation goes bankrupt.

From Australia: Banks will make own way on rates

Boss of retail banking Andrew Thorburn said that even if the central bank starts cutting rates, retail banks may not follow.

"Yes banks have rightly decoupled and I think it's fair to say that the RBA has less influence on mortgage rates today.

"We have to make decisions based on a variety of factors, including the cost of wholesale funding.

"If our costs are going up and the cash rate is going down, then you have the cash rate and our costs moving in opposite directions and may mean banks cannot pass the full cut on to borrowers. It may mean banks won't pass on any cut.''

Mortgage rates are still rising despite the attempts of the Fed to widen the differentials. Look again at my graph above: the gap today is smaller than all previous gaps when the Fed tried this scheme in the past. All systems are straining to revert to the correct, balanced model which is, CD rates MUST go up, a lot, to attract savings and thus, 'capitalize' the banks. If we don't do this, we get hyper-inflation or a complete collapse into a depression! Certainly, the Fed and the US government are NOT balancing the books. They are unbalancing everything in a wild, flailing effort to restart a hopeless and very dangerous housing bubble and thus, re-inflate housing values to artificial levels again.

Mr. Mortgage: 2nd Mortgage Holders (Banks) Now to be Bailed Out Too - Breaking!

Already in the original bailout proposal, banks get to turn their toxic first mortgages into FHA at a much smaller haircut (principal reduction) than these toxic loans are selling for on the street. Now, banks can give up their toxic 2nds in exchange for appreciation in your home and an ‘IOU’ that will probably have a higher value than the 2nd mortgage itself. Now you have two partners; the Gov’t and the bank! I can’t verify this but I bet if you have a first and 2nd mortgage, the ‘bailout’ will result in you getting the least percentage of the upside in the future.

2nd Lien Provision Added to Housing Bill - Source: National Mortgage News

“Second lien holders could benefit from permitting the refinancing of struggling homeowners under a special Federal Housing Administration foreclosure rescue program contained in a massive housing bill the House is expected to pass Wednesday. A provision added during final negotiations on the bill will allow second lien holders to share in a portion of future appreciation on the property. However, they have to agree to the restructuring and refinancing of the existing first mortgages, which would extinguish any second or subordinated liens”….

This is such a mess. So much of this ‘kitchen sink’ bill makes no sense.
*snip*
Second mortgages were mostly never sold or securitized so the losses are a direct hit. When these loans were originally made they were ’secured’ by the home but now values are down across the nation so much in such a short period of time, large percentages of these large loans are unsecured so banks can’t even foreclose if borrowers miss mortgage payments. They have to treat these like credit cards using more traditional means of collection.

All the bad lending practices that should have never happened in the first place will be protected and extended so bankers can continue doing these hopeless, dangerous things! We desperately want the easy lending, free money system going no matter what. And we see from the graph above, this will cause hyperinflation or a total financial collapse. Certainly, the present system is utterly unsustainable. Bankers offering second mortgages knew perfectly well, these things were supposed to be SMALL, not huge. Now, we see houses with double mortgages THE FIRST DAY THEY ARE BOUGHT. This is pure insanity. This was due to savings lagging far, far behind the value of the housing. So people no longer saved ANY money to buy a house, they did it 100% via 'lending'. This is double starvation of the banking capitalization system. The down payments on houses were supposed to recapitalize the bank so they could lend to the buyer!

In other words, if the bank simply lends, they would run riot and lend nonstop. So they rigged up the 20% rule: to get a loan, the person had to deposit the 20% capitalization amount to balance things. Then, this was dropped in the last 35 years to only 10% capitalization. Today, it is 0%. So the entire banking system is collapsing due to NO ONE putting in any capital! The bank originating the mortgage would accept a LOAN from ANOTHER BANK which was then called 'the down payment' even though it was NOT. It was a SECOND MORTGAGE which made things TWICE AS BAD AS BEFORE!!!! And very inflationary! Which is why housing saw huge inflation in prices during this period.

And as the US goes bankrupt and tries to restart the one industry that needs to take a breather due to excess new housing and excess old housing on the markets, we fall behind Japan in the race for industrial power:

Toyota takes driver's seat in sales

Through the first six months of the year, Toyota Motor Co. sold 4.82 million vehicles, compared with 4.54 million for General Motors Corp., a 280,000-car gap. Last year, GM also trailed Toyota at the halfway mark but won by the slimmest of margins -- fewer than 4,000 cars and trucks for all of 2007.

This year, however, it appears increasingly likely that GM will for the first time cede its title, as soaring gas prices, sagging consumer confidence and an over-reliance on sport-utility vehicles and trucks hurt it in its most important market: home.

This is ridiculous. The US could have put SUVs and trucks under gas milage standards. My one ton truck gets double the miles per gallon as the biggest SUVs. And raising gas taxes would have prevented this oil shock today. This way, the government can lower the taxes if oil suddenly surges. Toyota and indeed, all other cars on earth are outrunning the US in the markets due to our cheap gas luring us into tooling up for factories that only make gas guzzlers no one on earth wants. Now, even we can't afford any of this.

Chrysler Corpse
By Eric Peters

Things are bad at GM -- sales down almost 20 percent -- and open talk about the possible amputation of under-performing/overlapping brands such as Pontiac, GMC and maybe Saturn and Buick, too.

But the diagnosis is much worse for Chrysler Corp. Some analysts believe that unless a transfusion of money and other resources can be found via a buyout or partnership with a healthy automaker such as Nissan/Renault (or even the Chinese), Cerberus -- the private company that currently owns the sickly husk of Chrysler Corp -- will cut its losses and dump the whole shebang.

Time frame? A year, at the most. Maybe less than six months.

Unlike GM and Ford, which are still publicly traded corporations, Chrysler is little more than an asset (a liability, actually) held by Cerberus -- which can decide tomorrow night if it wants to that it's time to cut bait. And given the awful condition of Chrysler -- and worse, its equally awful prospects -- that decision may come sooner rather than later.

Chrysler is dying again and the hell hounds of the Cayman Islands is very unhappy. Indeed, the gnome community is in despair. Congress is cutting off their funding. They might simply let all the markets collapse. Who knows? Only the gnomes know. Heh.

The Chinese are sniffing around. They are understandably suspicious. The entire US is on a 'nationalization' run here. Only it is semi-nationalization just like our medical areas are semi-socialist. China has capital. The US has debts. This, in a nutshell, is the story. The real question is, not who will buy us out but when.

Traders manipulated oil prices

(CNNMoney.com) -- The government charged an oil trading firm Thursday with manipulating oil prices in the first complaint to be announced since the regulators began a new investigation into wrongdoings in the energy markets.

The Commodity Futures Trading Commission accused Optiver Holding, two of its subsidiaries and three employees with manipulation and attempted manipulation of crude oil, heating oil and gasoline futures on the New York Mercantile Exchange.

"Optiver traders amassed large trading positions, then conducted trades in such a way to bully and hammer the markets," CFTC Acting Chairman Walt Lukken said at a press conference. "These charges go to the heart of the CFTC's core mission of detecting and rooting out illegal manipulation of the markets."

First there was no naked short selling. Then it was forbidden. Then there was no oil market manipulation. Now it too, is being forbidden. The gnomes need to inflate SOMETHING, anything. This is what a Bare Bear market looks like: naked, screaming gnomes running wild. Alas, this won't make a good video that can be sold after spring break.

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Comments

[charlottemom]

In your commentary you reference 1977 yet the article quoting Goldman economist clearly states "since 1997." Am I missing something?

[Frederick N. Chase]

Ron Paul summarizes the Housing Bill.


http://


news.goldseek.com/RonPaul/1216926862.php


There's a nice text summary of what he said.


Also a you tube video if you have more time.

[don]

CNBC never mentioned that the CFTC had charged
Optiver Holdings for manipulation. What a cover up..CNBC sucks. Wonder why I like
Bloomeberg better.............

[Paul S]

About GM: blame GM management. For years GM ignored the Japanese automaker threat; GM were smug and arrogant. And stupid. They never figured it out. No world class innovation at GM that's for sure. You also can't ignore the deep and bitter hatred GM management had/has for the UAW as a factor for the decline. IMHO GM is getting its just desserts. Now if only GM could put its factories on barges...

[Richard]

You relate that the "housing rescue WILL NOT work at all"; that is correct. Fannie Mae, FNM, and Freddie Mac, FRE are goners and they are zombie corporations, that is they are soulless, capital-eating monsters dragging the entire stock market lower.

The Rescue to lend to and capitalize the GSEs is coupled with the Dodd Frank housing bill, which is really Bank of America, BAC, rescue legislation; the forthcoming action of Congress and the President effectively nationalizes the US mortgage backed security debts onto the backs of the US taxpayers; it privatizes gains to investment bankers and banks and socializes losses to the people of not only America but the world as well. The legislation establishes significantly greater authority in the US Central Bank chief Ben Bernanke; and solidifies an interwoven plutocracy of legislative and business leaders in state corporate rule in America.

The powers granted the Fed Chief are remarkable, he basically becomes the chief, not only over banking, but over housing and the mortgage backed security debt of America.

He becomes a Seignior, meaning top dog financier who takes a cut -- he gets a salary and yields great economic power.

Gradually, step by step, we are moving into the vision of New York Federal Reserve president Timothy Geithner who has called for unified regulation of global banking.

And you relate that "Toyota has finally become the world's biggest auto manufacturer". Yes, and their dealership has been a large employer in my local town. But now their SUVs and trucks are piling up like logs in a flooding stream; so much so that the local dealership is parking the unsold overflow in a church parking lot. They glimmer there as shining tombs to the floating currency policies and Regime of Milton Friedman.

As you point out currently the Federal Reserve interest rate as is well below the inflation rate (this is one of the factors that is driving gold higher)

And you remake that "The bonds markets have been broiling over lately. There is tremendous chaos building there that the Fed tries to paper over with artificially cheap lending rates from the Mother Of All Inflationary Machines: the US government".

Well they are running out of paper to cover the mess up.

The bond market place is starting to call interest rates on the 30 Year US Treasury Bond, $TYX, higher: first on March 18, 2008 and then just last week, when The Rescue began.

You ask, "Will the widening spread between mortgages and rates save the profit margins of bankers?" No, because of their level two assets and level three assets, the latter being marked-to-fantasy, and because of the debt kept off the bank's books in qualifying special purpose entitities, SPEs, and SIVs.

And you say "Off the cliff we fly"; how true, the downward stock market action yesterday was not in reaction to the housing report as the media suggests; but in response to the House of Representatives passing of The Rescue.

You relate: "The bill also states explicitly that borrowers cannot be forced to purchase an annuity or other financial or insurance product as a condition of qualifying for a reverse mortgage." Elaine thank you for this news, it is good news to me as I have an elderly friend who is very poor. I am going to recommend that he get a reverse mortgage and invest in gold at those vaults-on-the-web and in a gold ETF, like GLD in a trust account and not a brokerage account, as I expect there is coming within days or weeks at the most a or multiple systemic risk events where there is going to be a Financial Armageddon. This way that old person will at least be able to stay in his home, pay his taxes and have something to eat. However, I have to be realistic, he does not have the frame of mind that I do, and the advice will go unheeded (and unremembered probably too).

Those poor gnomes and yen carry traders, they are hurting right now; the remedy for them is now that the market is ticking up, like the Russell 2000, IWM, up 1.16% is to go short; like get the 0.5 percent interest loan from the Bank of Japan and go long the Proshares 200% bear market ETF, SJF, which is down 0.61%; it being down right now as I am writing makes a safe entry point. Yes they should be locking and loading up to the max, up to the gills, if they have gills, on this inverse today, so as the market continues on over the cliff they can continue to live in their island coves.

But as for me, I do not want a dollar denominated anything, I am glad I have some gold; at least for now, that is, before I have to sell it in order to by a morsel of food.

[calvino]

Richard, the funds can not go whole bear, even if they wanted to, since that would destroy their own book. They are too big to get out of their own way. When someone plays cowboy, like SemGroup, which correctly read the inflationary infusions and put their clients money into crude - the ax is brought down on their heads. Now that the hyenas made a kill, oil is going to go back up and the short sellers of crude are going to be ruined. The market has become detached completely from fundamentals. Fair is foul and foul is fair, hover through the fog and filthy air. I have a responsibility to those that entrusted me to safeguard their money. Otherwise I would not want to be anywhere near this market. It's like fighting off sewer rats on their home turf. Today, as the dollar was folding and Asia sinking, there was a v reversal in the dollar. It shot up a ninety degree path, as well on the euro and the chf and the cad. This was a payoff for the Fannie rescue of Japanese Fannie bonds. Fuck them? Nah, fuck us, said the Congress. You can vote for whomever you like, but meantime, fuck you.

[Elaine Meinel Supkis]

Oh, I have a lot more news about all this! From Asia, of course.

But first remember how too much debt is dealt with by this planet: it MUST vanish! It has to! So the method is whatever works. If you can't go bankrupt, you pick up a gun and begin shooting, for example.

The destruction must happen! Avoiding this means something is destroyed.

Japan, for example, killed inflation and eliminated the huge bubble by destroying the working class totally. Wages and values dropped like a rock. Now, inflation is eating the rest!

They are DYING. In South Korea, they are rioting. In China, the workers are alive, alert and full of energy.

The US is like Japan: workers dying.

[Gary]

When TSHTF, the ruling class of this country
will run into the arms of the Chinese, the Comrades,and the Sheets of Araby.

They will fall all over themselves vying
for their new jobs as overseers for the
new Massa's plantation. Our military's new
focus will, of course, be internal dissenters
that still think there is a constitution and
bill of rights.

Our new jobs,if we're lucky, will consist of making Santa Claus widgets for good little
Chinese kids.

Let us now turn to our hymnals and sing what the British troops did at
Yorktown so long long ago.

"If buttercups buzz'd after the bee,
If boats were on land, churches on sea,
If ponies rode men and if grass ate the cows,
And cats should be chased into holes by the mouse,
If the mamas sold their babies
To the gypsies for half a crown;
If summer were spring and the other way round,
Then all the world would be upside down"

Amen.

[Bear of Little Brain]

History rhyming?

More power about to be devolved to the banksters on the eve of a recess, through legislation of their own creation, passed by corrupted politicians and introduced as a result of (planned?) financial collapse.

I'm thinking 1907 Morgan-induced Panic and 1913 Fed Act. But then, why bother with new tools when the old ones still work just fine?

Calvino:
Bernanke on inflation?:

I am in blood
Stepped in so far that, should I wade no more,
Returning were as tedious as go o'er.

[DrKrbyLuv]

Short term greed has taken root in corporate America as companies like the automakers look only to the next quarter...forget the future.

They focus on bonuses and compensation. They don't prepare their companies for the future and they dump people at a moments notice if they need to sweeten up the books. As a result, our industries have been destroyed.

[Gary]

Remember Grand Pappy Prescott Bush ?
And how the feds almost shut down his Union Bank of New York for cutting financial deals with the Nazis ? ----in 1943,no less, not 1933 !
Hell, he was just hedging his bets thinking
that if the Nazis won, he'd probably help
them run the US for them. Right now, the
Rockyfellers,Bushes,and the Beard and his
circle are probably getting ready to do the
same.

[Bear of Little Brain]

Bit off-topic but, today, www.housepricecrash.co.uk had a link to this May 2008 article by Ellen Brown on Bear Sterns and Morgan. Maybe Elaine covered it at the time, but I don't recall it. The article considers that JP Morgan was bust, and the Bear Sterns take down was intended to avoid JPM going down. Since the Fed exists for the benefit of its international-banker owners, and as JPM was the most exposed at the time, I'm persuaded.
The article also has an interesting take on why Spitzer really fell from grace and a summary of Paulson's Fed power grab. Worth reading, IMHO.

http://www.webofdebt.com/articles/banking-bailout.php

[Blunt Force Trauma]

Another good one, Elaine.

"....we will continue to flap around the flame of cheap loans like a moth looking for sex with candles."

Damn! You figured out my trolling-for-bar-babes technique!

Just enjoying the (subdued for now) bonfire from north-of-the-border. We're next though. I can feel it.

[Christian W]

Who will play the role of McDuff? =p (I know! I know!)

[calvino]

Blunt.. no.. Canada is the only g8 country with a fiscal surplus. You have grains, wheat, oil, timber, water, NG and uranium. Many of the termites that wrecked this house will be fleeing up there for safety. That's why the chairrat of the Fed has his money in your bonds.

[PLovering]

Elaine: I agree, destruction must happen.

Congress must say NO to more bailouts. Purge the system of central bankers, and restart with a public money supply.

[DeVaul]

I think what Blunt is saying, Calvino, is that he KNOWS the termites are coming there -- and we all know what termites do.

True story:

My neighbor had termites, so I called a pest company to come inspect my home. I told the inspector that I was worried the termites might just migrate to my house after they are forced to leave hers.

He stare past me into the rafters of my basement with a flashlight and just said: "They will. They will."

[Reverse Mortgage Lender]

I disagree and have been waiting for our portion of this bill for several years now. Our senior homeowners in California have homes worth 500-750k yet have been limited to old limits of $362,790. (meaning the difference of $362,790 to say 500-750k is literally out the window). Also seniors will be able to purchase a home with the reverse mortgage which will also stimulate the economy. We have 10,000 baby boomer's a day turning 60!

I posted the HECM amendments at: http://www.allrmc.com/articles/House_Passes_HR_3221.php

[Elaine Meinel Supkis]

Reverse Mortgage Lender, thine name really is Rednel Egagtrom Esrever!

Like all wannabe gnomes, you think I have no brains! Well, I was once a goddess...heh.

So...if the elderly in expensive houses couldn't get a reverse mortgage this means...they can leave something for the kids! Wow! Heirs! Instead of your bank.

If they are in trouble, they can sell the house and live elsewhere. I have moved 20 times in my life! And this was fun, I thought.

My elderly father has moved just as many times as I. And why in the name of hell do the elderly need REVERSE loans to buy a house? Weird.

When I bought and sold, I always made a profit. I have not had a mortgage of any sort since 1992. My elderly inlaws paid off their house in 1986. They have had no mortgage since and have therefore accumulated a lot of investments because they were not paying a mortgage. Or eating up their wealth.

The sinkhole of the reverse mortgage is simple: you start out with equity, property and are free and end up with nothing at all. And do note the GOP passed the tax cuts on inheritances just when this particular financial termite comes crawling into middle class homes!

So at the front end of life, in college, we go deep in debt and at the back end, we eat up all our value we try to accumulate. And in between, we are in debt, too.

This is why America has no savings yet we have a huge budget deficit paying for war, war, wars! We have an empire and are broke.

[donh]

Ad immediately to the left of the "Chrysler Corpse" article: Tax Havens. The typical reader of The American Spectator must make a lot more money than I do.

One of their upcoming events "FX University, Your Chance to break free from the Dollar...".

[Michael]

Anybody who still trusts our politicians and financial czars to do anything other than fatten their own pockets at workers', consumers', and taxpayers' expense will get exactly what they deserve: continued theft, theft, and more theft. Trust the banks, brokers, and government at your own risk.

If you haven't figured this out yet from watching the events of the last 7 years (as well as those unfolding right now before your eyes) there's no hope for you. Just as socialists insist planned economies solve all problems, capitalists claim free markets solve all problems, and both of them are lying through their teeth to maximize their own power to pick your pocket. These ideologies don't solve any problems, they merely provide cover and opportunity for the most aggressive among us to rip off the most trusting.

The current "crisis" (which is simply the much-predicted - because very familiar - crumpling of the overextended debt markets) will end up further concentrating financial power and wealth for the fortunate ones and setting up the next round of overextended gluttony. Now, who was it that said 130 years ago this is exactly how capitalism is actually supposed to work? Oh yeah, Karl Marx.

[Gavin Gaskins]

Dear Elaine,

OBVIOUSLY: if you inherit nothing at all, why work to make it better? Why paint it? Why fix the plumbing? Wiring? Why do anything at all?

Correct, just like returning a rental car. I wonder if one has ever been returned freshly waxed.

Take care,

Gavin

[Gavin Gaskins]

Dear Elaine,

One other note. Maybe I'm missing something here. If one were elderly and expected his home to fall in value, why wouldn't he want to execute a reverse mortgage? Wouldn't one then be "short" his house, a good trade if values fall?

Take care,

Gavin

[GLL]

Elaine,

With the game so rigged, what is the best strategy for riding this mess out? There is a sense of helplessness watching how they change the rules on the fly to benefit themselves at the expense of the average person. One gets the feeling that cash, T-Bills, and any US assets are going to be worthless at the rate we are being sold out. Any comments or guidance would be appreciated.

[cheap loans]

It's interesting discussion.
Regarding loans, i could know a lot of new info.

[Web Hosting Plans]

http://www.goodwebhostingplans.com/

About GM: blame GM management. For years GM ignored the Japanese automaker threat; GM were smug and arrogant. And stupid. They never figured it out. No world class innovation at GM that's for sure. You also can't ignore the deep and bitter hatred GM management had/has for the UAW as a factor for the decline. IMHO GM is getting its just desserts. Now if only GM could put its factories on barges...

[Nicole Vickers]

I was looking for blogs about Toyota when I found this blog. It's good to know that I'm looking for a car from the leaders in auto sales. I hope I can find good car dealerships in Indianapolis, Indiana that offer good Toyota cars. I'll be getting the used ones because I'm really tight on budget. It's good that there are a lot of Indianapolis car dealers we can ask for when it comes to Toyota cars. I remember seeing some Toyota cars on display the other day. I wonder if they're still there.