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1948 Panic?


I'm guessing 1948 was a typo, for 1848 -- although if memory serves, the big panic was in 1837, and it involved the Bank of the United States set up by Nicholas Biddle with Andrew Jackson's blessing as a counterweight to private and international banks (and not the Bank of America, a local San Francisco-area bank that prospered in the city's rebuilding after the 1906 earthquake and fire).


that early era's big panic, that is

Elaine Meinel Supkis

OOPs. Hit the wrong key! Will fix.


We're probably talking about the 2nd Bank of the United States, set up by Congress 1816 and est. in Philadelphia. The U.S. government paid 20% up front, and the bankers used that 20% to pay for their 80% share of the bank. Foreign bankers ended up with 33% of the bank.
President Jackson was determined to close this crooked bank, but Nicholas Biddle fought like crazy to keep it open. In fact, Biddle threatened Jackson with a Depression if the bank's charter was not renewed. And Biddle did call in old loans and refuse to make new ones, causing a recession. In the end, Congress refused to renew the charter, and Biddle lost his bank. Biddle however refused to turn over his books (revealing foreign interests and bribes to Congressmen). Jackson was almost assassinated for this effort to save our banking system. Fortunately, both of the assassin's guns misfired. The assassin later said that foreign interests had promised to protect him.

Lincoln was determined to close down private banking, as well.



Professor Minsky discussed how commercial banks - which were originally intended to take in savings deposits and make loans to businesses and households - transformed themselves completely out of this business.

In order to safely make a bank loan that will pay a profit after the interest on savings deposits is paid, the banker has to conduct face-to-face in-depth loan analysis of every bank loan application. This is what commercial banks used to do. And the only profit made is the difference between the interest the bank pays on savings deposits and the interest it makes on loans - often 2-5%. This can be leveraged, but only up to the limit of the strict reserve requirements applicable to FDIC insured savings deposits.

Once the "New Financial Model" of the Reagan, Clinton, and Bush eras was established, commercial banks and investment banks became the same thing - volume packagers of massive debt gambles (business and mortgage loans bundled into CDOs), and direct gamblers with the money they borrowed. This "casino" banking was done either by using computer models to predict rosy outcomes for all loan applications or by simply approving all loan applications without examining them at all (or requiring any collateral or income); the profit was in loan volume and loan size - little or no time was spent per application, no time was spent montoring the loans made, and the profits become instantaneous and huge, much like a casino in Vegas or Atlantic City.

Particularly after Greenspan's 1998 hedge fund bailout and interest rate drop (in the middle of a stock market "irrational bubble" - as he described it), ever increasing leverage was used to magnify the profits on the money used by the banks to gamble with. This money was borrowed from other banks at the interbank rate which was much lower than the rate the banks would have had to pay holders of savings deposits.

All the banks used this scheme (with the Fed's approval) to create money by lending to each other and inflating the total available to them all. Most of the biggest banks are deeply involved with hedge funds, equity capital firms, and other members of the Shadow Banking System to pass around unbelievable quantities of money for everyone to use at the casino. Savings depositors have become completely irrelevant to such banks.

Since every dollar the banks got their hands on, leveraged (often 20 to 30 times), and churned into quick-turnover loan bundles, brought in obscene profits, banking became the "golden child" of American enterprise - especially after the tech stock bust depressed the stock casino. The Fed kept the interbank interest rates very low, Congress and the Administration greatly lowered taxes on the fabulous salaries that financiers were raking in, bank stocks went up and up, and the financial sector became almost 50% of all U.S. business activity.

The traditional savings-deposit-based bank is an anachronism now, only to be found (extremely rarely) on a minute scale in a few small towns. The "financial crisis" of the big banks that the Fed has spent all its time and energy on is no more than the unravelling of this overleveraged overlending frenzy that was based on no collateral and no income ("Ponzi finance" as Minsky dubbed it).

If the Fed and the Treasury were to succeed in rescuing all big banks who are in the process of collapsing, it would only be for the purpose of propping up the same casino banking model within which they have all spent their entire careers, in which they all fervently believe ideologically, and which has made all of them very rich.

The only guaranteed outcome of this mess is that no officials and no bankers have any intention of returning to the savings deposit model of banking, ever.

Elaine Meinel Supkis

You are right, Michael. And all of this is part of the floating currency system. And all the old systems were destroyed so the governments could overspend in guns and butter. To keep people happy while spending money on imperial projects of various sorts.


The U.S. Federal Reserve Banking System is a private banking system owned by European Central Bankers. The FED was set up for the express purpose of looting the United States economy for the greater good of these European central bankers.

Their looting operations are planned around economic cycles of booms, busts, and wars.

Well, the boom is over. Welcome the Depression.

Buffalo Ken

You mean we've been letting some bankers from a distant continent loot us? I'm aghast. This must stop.

In fact, perhaps its time for some ruthless, nearly merciless, ferocious, and justified BOUNCEBACK that hopefully teaches a lesson that will never be forgotten.


Buffalo Ken

I think the pendulum is already swinging back. Now that it has turned things will happen rapidly. The key is too buffer it on its way back so that it doesn't go too far in the opposite direction and then we just repeat the same old tired back and forth extreme ridiculousness.

You know? Or am I being to vague?


It is plain stupid for the U.S. Government to pay hundreds of $Billions in interest every year to European Central Bankers, when we could print/issue greenbacks for nothing, pay no interest, and cut taxes into the bargain.

Which is exactly what we did in winning the American Revolutionary War.


Stockcharts.com reports that this last week, aggregate debt, AGG, manifested bearish engulfing: debt is going to deflate; eventually as the 'Liquidation Thesis' relates, debt is going to be liquidated, that is done away with.

You relate an important investment principle: 'loans are only valuable if they are paid off; and not via more debt'; many people know this principle, that is why aggregate debt has gone bearish engulfing and US Government debt bearsih harami: the wise are disinvesting from debt

I believe that consumer good prices as measured by the CPI, manufactured goods prices as measured by the PPI, are going to inflate, because of higher CRB commodity, RJI, oil, USO, industrial metal, JJM, and agricultural products, DBA, that are already in the system.

Having said that, I believe that commodities, RJI, are going to fall lower as they haved moved parabolically higher based on an inflating price of oil; then once having let off some steam, I believe that oil and gold will move higher. With oil being driven higher by speculators who see reduced supply coming from a war on Iran to stop its nuclear ambitions. And with gold rising higher due to an investment demand for gold, $GOLD, and a falling value of the US Dollar, $USD.

You also relate: "government overspending is our inflation"; how true that is; and that overspending is going to be reigned in: the global war on terror centered on Iran, and Afganistan, is going to be reduced. What is really going to take a hit is government services and payments, service sector jobs, unfunded retiree benefits; these are going to be drastically and awesomely reduced. Medicare and Medicaid are going to go be cut way down; this nation can no longer make $3,000 monthly payments to the Health Care REITS, such as Health Care REIT Inc, HCN, and Long Term Properties, LTC, to underwrite assisted living care; the publically financed retirement homes, where so many elderly live, are going to stand as tombs to the bygone era of prosperity.

Yes most definitely, the age of 'investment prosperity is over' and the age of 'financial disinvestment and instability', and the age of 'state corporate rule' are rising.

One might ask, "How is state corporate rule rising"?

The leaders have announced two 'framework agreements': the Security and Prosperity Partnership of North America, the SPP, and the Declaration of EU US 2008; these give them authority to address events that threaten economic stability, and which provide for economic competitiveness. The leaders have appointed councils, working groups and stakeholders, who work in global government principles and policies of security and prosperity.


Richard, the markets rallied on Wednesday on very bad jobs numbers. The heretofore reliable service sector, read governments and hospitality, only provided 7000 jobs in May. Real jobs got crunched, manufacturing down 60,000 plus. The blathering idiots on bubble TV never could get it through their skulls that the service jobs are foreign debt lines being played out to an uneducated and unproductive workforce.The numbers are ominous if you discount the 150,000 phantom jobs created by the birth death modelof the BLS. I am saddened at the low state of our bureaucracy, the total lack of integrity and reliability. If the bufoons on CNBC can now heckle the BLS, what is there left to say. I doubt greatly that the market would have rallied Wednesday if we had anything more than a third of normal trading volume, making the tape a lightwieght to manipulate. It appears that the PPT is no longer able to support the dollar myth or the myth of the value of the markets. While runaway inflation may push the prices of shares, the inflation of material inputs is even greater, and the offshoring card is not going to work anymore. There is very little left to offshore, even if China and INdia were not in an inflationary spiral. Thus, I doubt that share prices will go up, unless the FEd decides to increase its own credit lines. Welcome to Weimar, which Martin Hennecke of Tyche just about laughed at with glee. The Germans are about to give the Wilsonites a face pounding that they have been saving up for eighty years, gleefully. Should the Fed choose to buy any more new instruments, such as the Dodd/Frank bailout disaster, say goodbye to bonds and the dollar. Stocks will be sacrificed first, in my opinion. However with this bunch of Bozos, nothing will surprise me, any longer.


The Henneke interview



IN order to paste the link. reduce the print size on the screen by hitting CONTROL and the minus key at once, until the print is small enough to see the whole link. It is worth it. Tiny url refuses to do these bloomberg links, for some reason.

Elaine Meinel Supkis

I just click and drag it, calvino. Apple computers are wonderful!

Will read it.

Bozo is dead, by the way! I always loathed him even when I was a child. I am not the only child who found him to be totally creepy.



Well said.


Elaine, what do you know about the end-time prophesy and who is promoting it? Is the born-again movement just zionism injected into christianity? Lots of very specific predictions about the future battles in the middle east.


Elaine Meinel Supkis

Argh. Many eons of many battles in that accursed land. Easy as pie to predict them. The first major battles by humans in an organized fashion raged in this region.


PLovering -- many thanks for correcting my misimpressions of Jackson, Biddle, and the 2nd Bank of the U.S., which I had exactly backwards.

And of course I'd forgotten about the assassination attempts on Jackson. (It's been over 40 years since I studied that period of American history in any detail. Funny how the mind retains some details but screws up the big picture!)

Elaine Meinel Supkis

And as usual, maybe we should all revisit that interesting time period. Mexican War and all. My ancestors stumbled into California seeking gold, of course.

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