Money Matters

Gollum Still Wants To Get That $700 Billion

September 30, 2008

Elaine Meinel Supkis

75% of the US public didn't support the Bank Bail Out TARP coup. Yet the vote was somewhat close in Congress. This shows the yawning disconnect between our representatives and the public. The terrible collapse predicted for Monday was merely a fall in stocks and banking gnomes refusing to trust each other...HAHAHA. No trust amongst thieves! Anyway, stocks fell across the world since everyone was hoping that the US public would foot the bill for the entire planet's market systems. Time to examine this and predict what will happen next.

Paulson to Work Quickly With Congress to Revive Plan

(Bloomberg) -- U.S. Treasury Secretary Henry Paulson said he will work with Congress to salvage a $700 billion rescue plan after the House of Representatives rejected his initial proposal.

``We need to work as quickly as possible; we need to get something done,'' Paulson told reporters at the White House after meeting with President George W. Bush. ``We believe that our plan, and the plan that we developed with congressional leaders and worked so hard, is a plan that works. And we need a plan that works.''

Damn right, 'We need a plan that WORKS.' But Gollum's plan won't work. Or rather, the work it will do will work for Goldman Sachs and JP Morgan but NOT for the people who are going to be on the hook for paying for this wretched plan. And this is what the plan is: making a bunch of life rafts for the ruling elites so they can paddle away while the Titanic sinks!

I can see why poor Paulson is peeing in his panties over all this! His phone is probably ringing off the hook as all his super-rich buddies call him, fangs dripping with blood. 'There will be BLOOD IN THE STREETS,' they shriek. Well, what they think as 'blood' isn't blood at all. The bloody streets come later when angry workers go hunting for them. They are talking red ink here. And their solution is simple: more red ink so they can use this to discharge their own red ink. They want a red ink transfer. So they get wealth and we get the bad debts.

World markets fell because the expectation of goodies collapsed. Let us not forget what happened the week before: stocks were certainly NOT falling at all! Goodness gracious. In anticipation of this tsunami of goodies that would be showered on them, all the gnomes and trolls and hell hounds celebrated. They were absolutely certain, Gollum would get the Ring of Power and then would use this to command the US public to buy garbage and hold it indefinitely or sell it at a loss to the US public, not to these creatures of the Night.

Instead, this silly coup belly flopped. The leadership of both parties supported this coup, of course. They are all trolls, gnomes and traitors, after all! Every single one of the negotiators of this dreadful TARP bank bail bill are multi-millionaires. Their sob story that passing this bill would protect the little people was fake.

Protecting us involves not dumping massive mountains of future debts on our children! I hope my beloved children can afford to protect myself and my husbands from the ill winds of being old as well as not being in debt when I am old so that there isn't an excess burden but that my home has full value equity! So if the gnomes dump trillions of debts on top of my children's future incomes, this destroys not only me but them! So I can't let this happen. I am FURIOUS that Congress merrily OKed huge spending bills that bust the budget to the tune of nearly a trillion dollars.

Congress can't pass this bill. Period. If they are so damn interested in fixing this ugly debt mess they created, they can start passing balanced budgets and impose tariffs and barriers so the flood of imports either slows down dramatically or we get enough money from an import tax so that THAT balances our budget! Got that?

It is utterly, stupidly simple. We won't shut out imports, we TAX the damn stuff and this INCLUDES OIL. Then, we see our government coffers bulge big. Right now, the US taxpayers are subsidizing imports by not taxing them. We, in turn, are passing all this along to our children by refusing to fund things fully. This cannot go on. By definition, it is unsustainable and it is destroying America.

Even if we EXPORT a trillion dollars of goods, if we import TWO trillion, we are a trillion in the hole! The rise in exports isn't stopping the flood of imports. GADS. This is the easiest thing on earth to understand and our government and media steadfastly refuses to understand this. Remember when emailing or phoning your Representatives, use stories like this one to read off the talking points. Tariffs and taxes on imports are GOOD. They will save our nation. If this starts a trade war....SO FUCKING WHAT!!!! WE ARE IN THE MIDDLE OF A TRADE WAR AND ARE LOSING, BIG TIME, ANYWAY!

Sigh. Isn't that easy? We can see why I am so unpopular in DC. Congressmen are not happy to see me. I irritate them and turn their world views upside down. Well, we all must turn them upside down! Or we all suffer the fate of being sucked down that toilet Ross Perot talked about so many years ago.

The Bailout and the Economy

The US trade deficit has grown to $US700 billion, which of course is money not spent on US goods and services. This has killed off well paying jobs, has slowed the economy and created unemployment.

HAHAHA! There it is again! That $700 billion is all over the place! This is the amount of our budget deficit. It is the amount of our trade deficit. It is the amount of the Pentagon's budget. It is a very interesting number that was echoed yesterday in the stock markets. This pesky $700 billion is obviously a MAGIC NUMBER. And therefore, a herald of sorts. Like a trumpet blowing in our ears. And I hope it has woken up the American people.

Here is an excellent read from the Mises Austrian Economist people:

Will Central Bankers Become Central Planners? by Robert Blumen

As if fighting inflation, smoothing out the business cycle, and saving the world from economic crises were not enough, central banks are being advised to include another objective in their mission: the purchase and management of stock portfolios.

The Washington Post reports that former Treasury Secretary (and soon-to-be-former president of Harvard University) Lawrence Summers "is advising some of the world's biggest holders of US Treasury bonds that they ought to find much better ways to invest their money." Summers says that by holding large portfolios of US Treasuries, central banks are passing up more lucrative investments in the stock market.

To make sense of this proposal (if indeed it makes any sense), it is first necessary to understand how central banks came to hold so many reserves, and why the majority of their reserves are currently held in the form of US government debt. From there, Summers's proposal is a small and apparently logical step.

I often argue with them. But this posting is quite right and should be passed around. There are so many fine minds out there! Virtually none of them are noticed by the top millionaires who run America. But if more of us read all of this, the more we form an alternative consensus. And this is certainly happening! If 75% of the US public can be so much at odds with the faux leaders of Congress and the White House including both Tweedle dumb and Tweedle don't candidates, then this is a GOOD THING.

The media will bend all its might to thwart this awakening. The media will twist and turn like a snake. The NYT and Washington Post both support this stupid TARP business. The Wall Street Journal is foaming at the mouth with rage over being thwarted. But we have the internet.

In Congress, at the party, the Congressmen there began to talk about the internet. They want to control it, of course. This began a heated debate between myself and them. Censoring us is a tool used by the rulers to prevent information from passing around. Lies can be passed around. But so can TRUTHS! And the truth is covered up by the mainstream media and is exposed online even as some online use this power to lie and tell stupid stories that have no real foundation or make up stuff out of thin air.

We get to pick and choose which reality we want! Not be forced into a faux reality by the media and by corrupt political leaders who gain power by eliminating choices.

Repos Show Credit Freeze Approaching March Level

(Bloomberg) -- Rates in the $7 trillion-a-day market for borrowing and lending securities show that the logjam in credit markets is approaching the level seen after the March collapse of Bear Stearns Cos.

Securities that can be borrowed at interest rates close to the Federal Reserve's target rate for overnight loans between banks are called general collateral. Notes and bonds that are in the highest demand in the repurchase, or repo, agreement market are called ``special'' by traders because rates on loans secured by these securities are lower than the general collateral rate.

The CHART OF THE DAY shows the spread of the general collateral repo rate below the Fed's target rate of 2 percent. The gap, which averaged 0.06 percentage point in the 10 years prior to August 2007, when subprime mortgage losses spread, is now 1.25 percentage points. A wider spread indicates a greater scarcity of Treasuries. The spread reached 2.05 percentage points on March 19 after the central bank engineered the takeover of Bear Stearns by JPMorgan Chase & Co.

When central banks have faux interest rates so they can encourage excess lending, we get this sort of mess. All the 'fixes' do is make things worse since all fixes are aimed at increasing lending when lending can't increase because all systems that want lending are too deep in debt! AH! Isn't that queer?

So reality is imposed despite this. Putting the US government an extra trillion in debt so that banks can churn out more debts is...INSANITY. It is IMPOSSIBLE. It is...EVIL. The extremely ancient story about the magic mill built by the gnomes that then kidnap the Frost Giant's daughters and enslaves them to force them to grind out gold, comes to mind. So the girls were hustled aboard the gnome's ship. There, the poor girls ground and ground. The gnomes wanted more and more. Finally, the girls protested and began to sing a dire dirge. This magic song suddenly caused the mill's internal magic to switch in an eye blink as fast as lightning from grinding gold to grinding salt. The heavy salt sank the ship.

But it continues to grind to this day which is why the oceans are salty.

The system is reversing. And this can't be stopped by doing the very things that caused the system to reverse. The good American people are being lied to. They are told, if we double our national debt, we can continue to over consume like in the past. But this can't go on. We are nearing the end. That is all there is. The more we try to continue in the teeth of all this, the worse it will become later. If we stop now, we will be OK in the long run. If we continue, we will be destroyed.

Money-Market Rates Climb After U.S. Congress Rejects Bailout

(Bloomberg) -- Money-market rates in Europe jumped to records after the U.S. Congress rejected a $700 billion rescue plan for financial companies, heightening concern more banks will fail, and as lenders hoarded cash as the third quarter ends.

The euro interbank offered rate, or Euribor, that banks charge each other for one-month loans climbed to a record 5.05 percent today, the European Banking Federation said. Rates on three-month loans in dollars were as high as 10 percent as of 10:50 a.m. in London, said Ronald Tharun, a money-market trader in Stuttgart at Landesbank Baden-Wuerttemberg, Germany's biggest state-owned lender. The dollar Libor-OIS spread, a gauge of the scarcity of cash, advanced to a record. Rates in Asia also rose.

``The money markets have completely broken down, with no trading taking place at all,'' said Christoph Rieger, a fixed- income strategist at Dresdner Kleinwort in Frankfurt. ``There is no market any more. Central banks are the only providers of cash to the market, no-one else is lending.''

The natural interest rate must rise! It is woefully low. Far too low compared to global inflation. Even as commodity prices fall, this isn't a sign that the world needs more debt. The world needs more CAPITAL and this is earned via LABOR. Labor, unlike mere commodities, involves levels of VALUE-ADDING which, coupled with union organizing raising wages, allows the workers to intercept profits and turn it into COMMERCE. Namely, buying things.

Depressions happen when the WORKERS can't get the profits! Japan has a queer depression going whereby the workers get nearly no rewards and can't buy hardly anything while the industrialists are swimming literally in golden bathtubs and making record profits, the greatest profits on earth! This is destroying Japan, of course.

Most Americans think Japan is like it was post-WWII with the bosses living sober, cheap lives and workers get life-time employment with good wages. That was destroyed after 1994 and been replaced with a repressive society that is seeing a huge gap between the top and bottom. This is why the prime ministers are falling like leaves in Fall every year, it seems. Eventually, the workers might waken and overthrow the LDP.

Wall St. Mess Stems Flow Of Petrodollars Into U.S.

(Nikkei)--The recent Wall Street crisis appears to have prompted Middle Eastern sovereign wealth funds to rethink their strategy of placing large portions of their petrodollars in U.S. stocks.

Bader Al-Sa'ad, managing director of the Kuwait Investment authority, said Tuesday it is the responsibility of each country's central bank to rescue financial institutions, stressing that the KIA has no intention of helping U.S. banks.

He also said he thinks the crisis in the U.S., Europe and Asia will create investment opportunities in various areas, such as the real estate and financial sectors, indicating that the KIA will review its portfolio.

One of the largest SWFs in the world, the KIA has more than 200 billion dollars in assets and invested a total of more than 5 billion dollars earlier this year in Citigroup Inc. and Merrill Lynch & Co. But those equities lost their value sharply due to the renewed financial turmoil. Al-Sa'ad said the KIA suffered a loss of 270 million dollars on its investment in Citigroup.

This is ass-backwards. The fall in the markets are BECAUSE of the OPEC people departing! They are not buying, ergo, the markets fall. And they are not buying because they are not stupid. They tried to prop up the global system and got burned. Now, they will buy other things of interest. This terrifies the Jewish financiers. They know what these things are.

Subprime, Alt-A Delinquencies Rise in August: Clayton.

Performance in recent vintages of both subprime and Alt-A mortgages continued to deteriorate during August… 60+ day delinquencies for both Alt-A and subprime mortgages had increased, while cure rates had decreased; interestingly, however, roll rates — which measure the percentage of loans that worsened in delinquency status — decreased in most areas. For 2006 subprime first liens, the 60+ day delinquency percentage reached 40.24%, a jump of 5.49% from the prior month; for 2007 vintage loans, 30.82% were 60 or more days delinquent, up 6.05%.”

The housing bust will be done once these stupid, useless subprime, Alt-A debts are totally wiped out. There will be a 100% failure rate in these things. And I said years ago, 'These should be ILLEGAL.' I used 'bridge loans' in the past to make money. This is necessary if one is developing housing. But these loans are never held more than three years! Usually, two at the most. Builders who got these bridge loans had to have good property to hold it against. Namely, I had this mansion and would use it as collateral since it had no mortgage on it. This was all before I had to sell everything when my husband got injured at work.

The geniuses in the gnome community thought they could take builder's loans and rename them and hand them out like candy to home buyers. Who then used this to play 'flip the properties'. This is a total failure and people should go to prison. Both flippers and the bankers. There was no collateral property backing these loans. As I pointed out, when I had to close down my own affairs, I had zero debt but zero profits. But I didn't destroy the banking system! This is important to remember: there has to be some basis for the system. It can't be built on cloud coo-coo land.

Now for one more book to read:

SECRETS OF THE FEDERAL RESERVE By Eustace Mullins

R.G. Hawtrey, the English economist, said, in the March, 1926 American Economic Review:

"When external investment outstrips the supply of general savings the investment market must carry the excess with money borrowed from the banks. A remedy is control of credit by a rise in bank rate."

The Federal Reserve Board applied this control of credit, but not in 1926, nor as a remedial measure. It was not applied until 1929, and then the rate was raised as a punitive measure, to freeze out everybody but the big trusts.

Professor Cassel, in the Quarterly Journal of Economics, August 1928, wrote that:

"The fact that a central bank fails to raise its bank rate in accordance with the actual situation of the capital market very much increases the strength of the cyclical movement of trade, with all its pernicious effects on social economy. A rational regulation of the bank rate lies in our hands, and may be accomplished only if we perceive its importance and decide to go in for such a policy. With a bank rate regulated on these lines the conditions for the development of trade cycles would be radically altered, and indeed, our familiar trade cycles would be a thing of the past."

This is the most authoritative premise yet made relating that our business depressions are artificially precipitated. The occurrence of the Panic of 1907, the Agricultural Depression of 1920, and the Great Depression of 1929, all three in good crop years and in periods of national prosperity, suggests that premise is not guesswork. Lord Maynard Keynes pointed out that most theories of the business cycle failed to relate their analysis adequately to the money mechanism. Any survey or study of a depression which failed to list such factors as gold movements and pressures on foreign exchange would be worthless, yet American economists have always dodged this issue.

I use this book as reference. Do enjoy reading it, Mullins is very clear about things. Now for really muddled thinking, let's look at this very dumb commentary by Irwin Kellner:

Don't call it a bailout. Or a depression
Commentary: The nattering nabobs of negativism have it wrong. Here's why

By Irwin Kellner, MarketWatch

Now, don't get me wrong, I am not saying things aren't serious out there, but another Great Depression? I don't think so.

If you look at the data, you will see more differences than similarities between the 1930s and today:

In the crash of 1929 the Dow Jones industrials plunged 40% in two months; this time around it has taken a year to fall 22%.

The jobless rate jumped to 25% by 1933; it is little more than 6% today.

The gross domestic product shrank by 25% during the early 1930s; it is up over 3% during the past year.

Consumer prices fell by about 30% from 1929 to 1933; and the last time I looked they were still rising.
Home prices dropped more than 30% during the Depression vs. about 16% today.

Some 40% of all mortgages were delinquent by 1934 compared with 4% today.

In the 1930s, more than 9,000 banks failed compared with fewer than 20 over the past couple of years.

Remember also it was policy errors, not the stock market crash, that caused the Great Depression:

This man, to make his point, muddles up time badly. He compares Year One of this Great Depression cycle with the ENTIRE depression cycle of 1929-1938. Comparing the statistics of one year against a decade of years is a fraud. This man knows perfectly well that he is being cheeky here. He knows the difference between one year and a decade. He was told to write this story and did his best to mislead.

For example, as our housing falls off a cliff, he claims that it isn't so bad. Why, by 1934, it was much worse than today! But the housing bubble didn't begin to slow down until last year. And the bankruptcy mess didn't begin until the fall of 2007. After four years of this collapse, I would not be surprised if we get similar numbers!

The first year of the Great Depression, 1930, the banking system was still limping along. It didn't fail until after 1933. And obviously, if we want no Great Depressions, we should have kept all those nifty laws passed back then that would have prevented this mess today. But Congress was paid to tighten the bankruptcy laws at the same time they loosened all the banking laws of the 1930's. And so we get a double-trouble mess. Which cannot be fixed by the US falling deeper into debt to the bankers!

So let's keep up the pressure and continue fighting these bastards!

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Three Interesting Emails I Received

September 30, 2008 New Moon Fall Festivals

Elaine Meinel Supkis

I get great emails from readers. Here are three of them. One is being kept anonymous but David Park's analysis is proudly his own and worthy of reading. And the one from Ron Paul is important to read. If any readers want to send a long email for posting here, I will happily post it! Because I really admire the information and sagacity of the readers here. We have a rather high collective IQ. Except when we start joking. Heh. Meanwhile, I am going to write another, big, fat piece explaining what happened this last week and how it reveals international stresses and queer policies and how we can 'grow up' and start acting like adults, not naive children.

Here is the first email which came right after I came back from Washington, DC:

I used to work at a Wall Street firm, but now I handle financial services for [a Congressman], and I was on the conference call that Paulson, Bernanke and the House Democratic Leadership held for all the members yesterday afternoon. It's supposed to be members only, but there's no way to enforce that if it's a conference call, and you may have already heard from other staff who were listening in.

Anyway, I wanted to let you know that, behind closed doors, Paulson describes the plan differently. He explicitly says that it will buy assets at above market prices (although he still claims that they are undervalued) because the holders won't sell at market prices. Anna Eshoo pressed him on how the government can compel the holders to sell, and he basically dodged the question. I think that's because he didn't want to admit that the government would just keep offering more and more.

I don't think that our leadership has been very good during this negotiation (or really, during any showdowns with this administration) at forcing the administration to own their position. If Paulson wants this plan, then he needs to sell it to the public, and if he sells a different plan to the public (the nonsense buying-at-market-price plan) then we should pass that. I'd rather see the government act as a market maker for the assets to get them transferred over to private equity firms and sovereign wealth funds and other willing holders. And if we need to recapitalize these companies, it seems like the cheapest way for the taxpayer is to go in and buy up the distressed debt and then convert that to equity.

Losses on the paper acquired are guaranteed. This is not a bug but a feature. The whole point of this exercise is an equity infusion to banks. The failure to be honest about it upfront will lead to a taxpayer backlash (or will lead to the production of phony financial statements for the rescue entity, which will lead to revolt by our friendly foreign funding sources).

Taxpayers have no upside participation.

There is no regulatory reform as part of the package. This would seem to be a minimum requirement for a donation of this magnitude.

There is no admission that deleveraging is inevitable. This plan seems to be a desperate effort to keep bad debt from being written down. Yet the sorry fact is that a lot of these assets simply will not be repaid.

There appears to be no intention to do triage. The financial services industry, on the back of an explosive growth in debt, has reached an unsustainable size. The industry will have to shrink. Yet the Administration does not address this issue; indeed, it appears it intends to forestall the inevitable. Regulators need to decide who will make it, who won't, and figure out what to do with damaged institutions. Instead, the reaction is ad hoc. The stunner was the contemplation of a possible merger between Morgan Stanley and Wachovia. As far as I can tell, the only thing the two firms had in common was coming into crisis on roughly the same timetable. For all I know, their IT systems are not compatible (many an otherwise promising bank merger has been scuttled over IT integration issues).

And here is the other that came this weekend:

On Sep 27, 2008, at 8:18 AM, David Parks wrote:

Elaine, all along, I’ve been attempting to understand outsourcing in relation to what you tell me about the systematic destruction of the US economy. I search the web a lot, attempting to figure out an overall picture of why wealthy US corporate globalists are turning on the nation of their birth and are systematically destroying it. I think an overall picture is finally emerging, and this picture is an ugly one.

The more I read your blog alongside global news and research, the more obvious it is to me that a US to Chinese sellout deal was secretly made long-ago between the Chinese and treasonous US globalist CEOs. Other deals have been made with the leaders of Britain, Canada and Mexico, but these deals were made to sucker those countries into the game these US based global elites are playing.

Chinese and other Asians were recruited to take over world manufacturing while financially propping up a failing US, British, Canadian and Mexican economy just long enough for US executives and elite investors to grab a huge chunk (around 70 percent now) of the US national wealth and leave the country while their stupid, paid political lackeys ignore US voters and sell out the US infrastructure to the Chinese, Europeans and others in a bargain basement fire sale.

Now, Mexican and Canadian and British jobs are being removed and outsourced to Asia. In other words, these allies were suckered so they wouldn’t prevent businesses from being removed from their nations also. For example, Hanes Apparel just announced that it is outsourcing 2000 US jobs and 6000 Mexican jobs to Asia.

What these elites really want is a North American decline leading to a poor, depopulated, rigid, orderly North America that they can easily manage from afar.

Of course Japanese elites are complicit in this also. Their goals are the same as those of US elites. They want rigid control of all of their national wealth, power and a drastic decline of their populations with their own privileged children controlling their nation and the world of the future.

For these ruthless elites, following Friedman’s idiotic free market and chaos theories are just a stupid farce used to dupe stupid people into going along with their own decline.

What these elites really want is a massive depopulation of North America and Japan through economic depression. Because of our recent national foreign affairs belligerence, we cannot avoid wondering if elite plans might also include large-scale warfare.

There are many worthwhile arguments for limiting population growth, but these efficiency-oriented corporate globalists want a drastic reduction right now. They have always envied rigid control the Chinese communists have over their populations, and they want a somewhat similar control system in place here.

What I’ve recently discovered as I search across the web is that Costa Rica is the new paradise on earth for wealthy US elite millionaires, billionaires and their lackeys.

Wealthy globalist elites have bought up much of the land in Costa Rica and they are moving there in large numbers. In the future they will live on large estates in luxurious mansions with their handmaidens, butlers and servants and manage their North American and worldwide holdings from afar.

While Costa Rica, much like Cuba during the 1950s, becomes the home and tax-free haven and sin-filled paradise for mega-rich American globalists and their lackeys, the US infrastructure will be allowed to collapse economically, socially and structurally. Then, it will be sold off piecemeal to foreign and global interests, thus enslaving native North Americans (Mexicans, US citizens and Canadians). If anyone doubts this, google Costa Rica real estate and view the million dollar plus real estate listings there.

So, rich elite globalists making money and simultaneously reducing populations is the basis for this terrible economic mess.

If this line of thinking is even somewhat correct, the following could occur:

The US infrastructure, including factories, roads and businesses, will be nearly completely sold off to foreign investors and distant global elites by broke municipalities at bargain basement prices. Foreign owners will let the North American people go hungry long enough so they won’t protest when they are put back to work for a few bucks (more likely, euros) per hour. Also, aggressive, poor Americans will be a willing pool for recruitment into military and mercenary ventures around the world, and such ventures will further reduce world populations. Look at Iraq today.


A great worldwide social leveling will occur as the US becomes somewhat like former colonial India, where distant owners dictate wages and living conditions for its rigidly oppressed masses while rich, distant owners collect huge profits and live in secure luxury in distant, tax free locations away from those who might come after them during peasant rebellions.

Those distant elite globalists will attempt to continue installing puppet regimes in Washington to harshly rule over impoverished US masses.

The Washington-controlled US military, in a much diminished, but nuclear form, will continue being the hired guns that impose imperial, semi-colonial order around the world and inside the US itself. This keeps young, potentially rebellious Americans, employed maintaining globalist order around the world while their parents wallow in poverty at home.

Computerized surveillance of US citizens lives and actions and even their thoughts will make suppression of any rebellious ideas in the US masses more cost-effective. Poorly educated, brainwashed and misled young thugs will make up future law enforcement. This dumbing-down process is already occurring in the public schools that are “teaching the test.” This teaches that there are only one, two or three pre-defined answers to any question and a certain thing is either right or wrong. For, the most part, however, public schools are now warehousing kids and imposing a lot of strong psychological discipline upon them until they become old enough to join the military or law enforcement, or become future impoverished servants for elites. They will become adults who are too discouraged, downtrodden and impoverished to form families and reproduce.

Because of depression poverty and oppression, the US, Canadian and Mexican birthrate will decline drastically. This will accomplish the goals of distant global elites. They seem to envision a future US that is somewhat like the US portrayed in the Kevin Costner movie, The Postman. They might even envision their offspring someday returning to an environmentally friendly, depopulated North America.

One wonders what is preventing of all of this from becoming our future in North America (Mexico, US and Canada)?

History gives us some ideas about this:

As the Roman Empire matured, the farmer-soldiers who fought and died for Rome were no longer given pensions and land by greedy conservatives who wanted the land for themselves and who had corrupted the Senate. This led to military dictatorships for Rome and the empire lasted a considerable while longer in a much corrupted and diminished form before The Church finally took over. In any case, a majority of Roman citizens lost all control of their government and the empire, and Rome’s fabulous glory days were gone.

In the US today, we see a declining empire:

Since a corrupt Supreme Court has decided US elections, and computerized voting machines have made rigging elections, from a local level to the national level, very easy for those in power, the will of the people has a much diminished effect on elections. Corporate produced and controlled propaganda is poured out by the mainstream US media. Since both political parties are bought and corrupted by wealthy globalist elites, and candidates are chosen beforehand, the people have little input into the process of government nowadays.

If voters become angry because they have lost power in the US, any outright rebellion will be brutally crushed by elites and their numerous, excessively funded, well-armed, semi-military style law enforcement agencies or by the military itself or by private security contractors. Dissenters will be harassed and persecuted until any peaceful protests are stopped.

This begs a huge question. What group still has enough power to oppose this oligarchic system that is being imposed on US citizens by global elites, with the help of zealous lackeys and exceedingly foolish, supporting foundations and think tanks that continually cook up new methods for oppressing the people.

Just look back in history to Rome to find the answer. This answer is the US intelligence services and the US military-industrial complex.

Why might these entities someday turn on their masters?

Out of patriotism and self-interest. As the US becomes poorer and poorer due to printing and computer-generating worthless money, outsourcing manufacturing of real wealth and a resulting deep economic depression, funding for expensive US intelligence agencies and the costly US military will dry up, and the dollars these people are paid will become worthless.

Professional US soldiers are already discovering what Roman soldiers long ago discovered. After they have patriotically given twenty long, hard years of their lives murdering others and dying to appropriate wealth for US elites and their corporations, they find that they are being cheated out of their share to the spoils they helped steal for the empire. In a declining, economically depressed future, even US generals will no longer be able to enter the revolving door military contractor network since the unemployed taxpayers cannot afford to keep those overly expensive corporations funded because of a destroyed tax base.

US intelligence agencies might be even more aware of the way things are headed since they attempt to analyze and plot future scenarios daily, and they always attempt to maintain some control over their turf. If they see the nation that pays their salaries drastically declining and come to realize exactly who is responsible, they might oppose those responsible sometime in the future.

The point is that these greedy, wealthy, elites want to run US and global corporate enterprises from a safe distance and away from the misery they create while they pay no taxes whatsoever and live in sin and luxury.

The Internet and international banking is their godsend. They see the world as being controllable from a distant haven while they are insulated from retribution by distance and private armies of security contractors.

Elite globalists pulling off this vast scam depends entirely on whether they can keep duping everyone who might see through their plans and attempt to stop them.

They have broken the US economically, and they will break even the vast US military-industrial complex if they are allowed to continue their piracy without opposition.

Most of those advocating war never served one day in the nation’s military, and feel no loyalty whatsoever to the soldiers they sent into harms way. This idea begs a question. Why would these wealthy anti-military elitists engage the US in ongoing, distant, foolish warfare where the best generals and soldiers are out of the country while the country itself is being looted by corporate elites? It’s just observation and question.

Continual, distant warfare and a vast empire is too expensive to maintain if a nation is already broke because controlling globalists have decided that they deserve to keep most of North America’s and the world’s wealth while the North American nations expire.

Several major groups need to unite to save the US nation or even the North American union of Mexico, the US and Canada. Groups that need to unite are North American citizens, government bureaucrats, major intelligence agencies, and the US military itself, including supporting military contractors.



Globalists are not friends of any of these groups

Globalist corporate elites are cleverly outmaneuvering everyone while stealing the wealth of the entire North American continent and much of the world while the above noted groups and agencies are kept busy infighting among themselves or against phony straw man enemies, or are kept busy oppressing others they should be uniting with.

The US military is kept busy fighting proxy wars for allies and to gain more wealth and influence for the global corporations that mainly benefit wealthy elites who are destroying North America and consequently the military itself.

Close allies know the US is declining and they want to use the US military as quickly as possible, before it declines, to oppress their neighbors before the US crashes for good. It matters little to allies whether the US sinks as long as the US military helps them achieve a lasting superiority over their neighbors.

It will be interesting to see what happens when the more powerful of these groups wakes up and understands exactly what is going on. Will they have the courage to set things right? Will they have the courage to restore the US nation to a Constitutional Democracy so it can continue and again prosper at some time in the distant future?

How might this be accomplished?

The answer to this is so simple that it is amazing.

Each of the above groups need to return to doing what the US Constitution tells them they should do.

Citizens and voters need to vote. They need to vote for politicians who take a stand that appears to be aimed at the overall good of the nation, while putting aside selfish interests for the time being.

Courageous politicians need to rebel and pass laws that provide public funding of all election activities that will enable them to break their ties to global corporatists who now have them enslaved. Yes, they are just miserable, wealthy slaves nowadays, with even less freedom than the increasingly impoverished masses they rule over. Because of their misery, they often escape with alcohol, drugs, sex, perversions and other gross immoralities—all symptoms of terrible personal moral decay and unhappiness.

Intelligence agencies need to gather intelligence that is in the interest of the nation itself, and they need to pass it on to the appropriate people who are genuinely working for the long-term interests of the nation.

They need to resist becoming a secret, private army that does the evil bidding of globalists who could care less about the US nation and its people. These globalists pay no taxes and provide almost no tax money to the US or to the intelligence agencies themselves. Traditionally, one works for the interests of those who pay their salaries. The US intelligence agencies need to return to working for the interests of those who pay their salaries, the American taxpayers.

If the taxpayers eventually sink into poverty, funding for all government agencies will decline also. Of course, global billionaires, living in Costa Rica and other Caribbean pirate coves could care less about a US decline.

The Constitution gives the US military the job of defending the nation and its people against foreign enemies. The military needs to do its job.

One could go on and on about the massive reforms that need to be made within the bloated US military-industrial complex system, but, at this time, that is not appropriate.

What is appropriate is simply stating that the military-industrial complex needs to realize that the nation can no longer afford to go entirely broke supporting foreign wars of aggression for global corporations and allies, some of which are not even American.

This is disastrously foolish for the nation and for the military itself. Global oil corporations will not sell cheap Iraqi oil to US citizens at bargain basement prices. They will make huge profits selling this oil on the worldwide market while US citizens cannot afford to buy heating and transportation fuel. And we should remember that allies will soon forget the US after complete domination of their neighbors is accomplished.

US military contractors need to realize that WWII glory days are gone. They need to adjust to a changed world. Drawn out wars just to use up hardware so more can be built, have long ago become just too expensive to continue. Creating worthless funny money and borrowing from potential enemies to sustain our military spending leads to disaster. How stupid can one nation become? Military contractors, with all of their existing expertise and wealth, simply need to rebuild what remains of the domestic heavy industry, manufacturing infrastructure of the US into a self-sustaining, updated, state of the art form that will provide future jobs and domestic products for US citizens. Think super quality Japanese-style manufacturing on steroids in America, for American markets--probably a really naïve and foolish idea, but I said it anyway.

Well, it’s going to be interesting watching what happens as major US groups slowly realize they have been completely suckered and taken for a downhill ride into the abyss by self-serving US global corporate elites. Will they act in time to save the nation?

We should all remember,

Globalists are not our friends.


Thanks, David

And this email here is from the Ron Paul Congressional Office:

Dear Friends: The financial meltdown the economists of the Austrian School predicted has arrived.

We are in this crisis because of an excess of artificially created credit at the hands of the Federal Reserve System. The solution being proposed? More artificial credit by the Federal Reserve. No liquidation of bad debt and malinvestment is to be allowed. By doing more of the same, we will only continue and intensify the distortions in our economy - all the capital misallocation, all the malinvestment - and prevent the market's attempt to re-establish rational pricing of houses and other assets.

Last night the president addressed the nation about the financial crisis. There is no point in going through his remarks line by line, since I'd only be repeating what I've been saying over and over - not just for the past several days, but for years and even decades.

Still, at least a few observations are necessary.
The president assures us that his administration "is working with Congress to address the root cause behind much of the instability in our markets." Care to take a guess at whether the Federal Reserve and its money creation spree were even mentioned?

We are told that "low interest rates" led to excessive borrowing, but we are not told how these low interest rates came about. They were a deliberate policy of the Federal Reserve. As always, artificially low interest rates distort the market. Entrepreneurs engage in malinvestments - investments that do not make sense in light of current resource availability, that occur in more temporally remote stages of the capital structure than the pattern of consumer demand can support, and that would not have been made at all if the interest rate had been permitted to tell the truth instead of being toyed with by the Fed.

Not a word about any of that, of course, because Americans might then discover how the great wise men in Washington caused this great debacle. Better to keep scapegoating the mortgage industry or "wildcat capitalism" (as if we actually have a pure free market!).

Speaking about Fannie Mae and Freddie Mac, the president said: "Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk."

Doesn't that prove the foolishness of chartering Fannie and Freddie in the first place? Doesn't that suggest that maybe, just maybe, government may have contributed to this mess? And of course, by bailing out Fannie and Freddie, hasn't the federal government shown that the "many" who "believed they were guaranteed by the federal government" were in fact correct?

Then come the scare tactics. If we don't give dictatorial powers to the Treasury Secretary "the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet." Left unsaid, naturally, is that with the bailout and all the money and credit that must be produced out of thin air to fund it, the value of your retirement account will drop anyway, because the value of the dollar will suffer a precipitous decline. As for home prices, they are obviously much too high, and supply and demand cannot equilibrate if government insists on propping them up.

It's the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.

The president also tells us that Senators McCain and Obama will join him at the White House today in order to figure out how to get the bipartisan bailout passed. The two senators would do their country much more good if they stayed on the campaign trail debating who the bigger celebrity is, or whatever it is that occupies their attention these days.

F.A. Hayek won the Nobel Prize for showing how central banks' manipulation of interest rates creates the boom-bust cycle with which we are sadly familiar. In 1932, in the depths of the Great Depression, he described the foolish policies being pursued in his day - and which are being proposed, just as destructively, in our own:

Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion.

To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection - a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end... It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.

The only thing we learn from history, I am afraid, is that we do not learn from history.
The very people who have spent the past several years assuring us that the economy is fundamentally sound, and who themselves foolishly cheered the extension of all these novel kinds of mortgages, are the ones who now claim to be the experts who will restore prosperity! Just how spectacularly wrong, how utterly without a clue, does someone have to be before his expert status is called into question?
Oh, and did you notice that the bailout is now being called a "rescue plan"? I guess "bailout" wasn't sitting too well with the American people.

The very people who with somber faces tell us of their deep concern for the spread of democracy around the world are the ones most insistent on forcing a bill through Congress that the American people overwhelmingly oppose. The very fact that some of you seem to think you're supposed to have a voice in all this actually seems to annoy them.

I continue to urge you to contact your representatives and give them a piece of your mind. I myself am doing everything I can to promote the correct point of view on the crisis. Be sure also to educate yourselves on these subjects - the Campaign for Liberty blog is an excellent place to start. Read the posts, ask questions in the comment section, and learn.

H.G. Wells once said that civilization was in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have.
In liberty,

Ron Paul
________________________________________

WE WON!!! HOORAY!!! TARP IS RIPPED TO SHREDS!

September 29, 2008

Elaine Meinel Supkis

When I arrived in DC at 1pm last Tuesday, I heard on the train that the top leaders of DC were going to ram through this $700 billion bail bill by that afternoon. But when I went into Congress, I discovered that the phones were ringing off the hooks to NOT pass the banking bail bill! Nonetheless, I must have been the only anti-bail bill lobbyist, I saw and heard of no others. But the next day, more poured in and Congress began to fight their own leaders! A very good thing. Democracy won today! Thanks to everyone for helping this along!

Goldman, Morgan Stanley Shares Drop as Bailout Fails

(Bloomberg) -- Goldman Sachs Group Inc. and Morgan Stanley, the two biggest securities firms before they converted to banks last week, sank in New York trading after the U.S. House of Representatives rejected a $700 billion financial-rescue plan.

Goldman dropped as much as 24 percent in composite trading on the New York Stock Exchange, while Morgan Stanley fell as much as 19 percent.

The House rejected by a vote of 228 to 205 the measure to authorize the biggest government intervention in the markets since the Great Depression. The legislation would have given Treasury Secretary Henry Paulson broad authority to buy troubled assets from financial companies.

This bill was a damn bail out for Goldman Sachs. I was very fortunate to sit right next to Paulson and the Sphinx. Paulson looked just terrible. His Precious, oh! His Precious was slipping away and he could see that his little coup was now doomed. Just 24 hours earlier this bill looked certain to pass, thanks to the top leaders in both the Democrats and the Republicans being totally corrupt and utterly owned by the same criminals who tried to circumvent our democracy. But each hour's delay created more and more resistance and anger. Time was on our side so I was happy when I left DC. Certain that the underlings in Congress would flush this down the toilet.

First off, the $630 billion Bernanke and Paulson needed Monday morning: I knew our trade partners in the G7 would never, ever let the fiat dollar die. This would utterly kill their lopsided trade with the US! This $600 billion sitting in London was mentioned but not discussed to my great disgust. So I knew there was this $600 billion piece of business that our trade partners wanted to have the US taxpayers swallow, not themselves.

But of course, when push came to shove, they all lined up and put all their collective reserves on line to bolster the US dollar. Otherwise, the dollar would be nearly worthless today.

This may look like we are playing chicken and we are. We know that when we drive straight at our European allies, they will swerve to miss us. For the alternative is for them to bow to Putin. Putin is laughing at all this on the sidelines. I recall the G7 nations were mocking him for his own stock market's declines.

Well, ours is falling like a rock! And it must for we have to balance our books. This is the month of Libra. She rules all and her rule is absolute. No pay, no eat. That is all there is to it. On top of all this ugly mess that the G7 persisted in pushing, we have our fading democracy. The bill submitted to Congress by two unelected elites was totally a coup! And should and was shot down by brave and good men and women.

Back to when I was in DC: no one was lobbying on Tuesday but Wednesday, people showed up. I was charmed by the small group of conservative kids who showed up to uphold real capitalism. They were energetic and fired up. The left focused on roaring demonstrations right at Wall Street. This barely made the news but it scared the hot shots of the NY delegation. Agitation works! We have to be quick and strike when the iron is hot! Just like my little visit did set some interesting wheels turning for I spent hours at a Congressional party, arguing the case against this bill, for example. This is why isolating our leaders stinks. They only talk to each other and the very rich and very powerful.

Pelosi has so much egg on her face today, she is as yellow as a canary. Her attempt at assisting a Wall Street coup has failed and she should RESIGN. Today. Her loss of face alone is reason for the Democrats to pick a new leader. The same goes for that tool from Vegas, Reid. He is complicit. He should be tossed out. I would suggest the Democrats vote in Kucinich as their leader. He would make life most interesting. I support his candidacy!

Whoever is chosen, they must be someone who is not tainted by bribed from Wall Street. Pelosi and Clinton as well as McCain and Obama, are up to their collective eyeballs in Wall Street bribes. They should all quit politics, frankly. Let us redo this election with a fresh slate!

I also know that Pelosi's coup would fail when a number of Democrats and Republicans caucused together to stop it because the bill was unconstitutional. The US has lost its constitutional bearings since 2000. Time to restore it to its original form.

I want to thank all the readers here who made this trip possible for me. We CAN turn the Wheel of History! And on top of that, the other elements needed, namely, a dose of magic and the arts of inter-spatial communications allowed us to get slightly ahead of events. Heh. So to speak. The people of America who wanted to intercept this bad bill had to run hard to pass it in the time/space frame set up by Pelosi, Reid, the Republican leadership including Bush as well as the co-conspirators, Beranke and Paulson!

The politicians should be impeached. Bush should be drawn and quartered. And Paulson and Bernanke sent to Siberia or even China for real rough justice. None of them should maintain their positions after this failed coup! This coup was TREASON. Arrest them all.

And thank you, all! We can win when we fight back, together!

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Mystery Of $600 Billion In London Solved!

September 29, 2008

Elaine Meinel Supkis

The Sphinx just released over $600 billion to all the worlds banks! Indeed...at the hearings in Congress that I attended at the very end, everyone made some sort of strange mention of '$600 billion stuck in LONDON.' I noted this down and got very excited. The Lehman Brothers executive sitting next to me had also mentioned this sum, too! So I have been watching the news for mention about this and here it is: Bernanke got his $600 billion to flood world banks with dollars because dollars are disappearing. This is the Derivative Beast eating money. I am certain of this.

Fed Pumps Further $630 Billion Into Financial System

(Bloomberg) -- The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed's emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.

The Fed's expansion of liquidity, the biggest since credit markets seized up last year, comes as Congress prepares to vote on a $700 billion bailout for the financial industry. The crisis is reverberating through the global economy, causing stocks to plunge and forcing European governments to rescue four banks over the past two days alone.

``Today's blast of term liquidity will settle the funding markets down, and allow trust to slowly be restored between borrowers and lenders,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. On the other hand, ``the Fed's balance sheet is about to explode.''

I scanned in the notes I made last Friday. This was the very last page of my notes that day:

Follow the money, they always say! Well, this $600 billion should be followed: it went across the planet. The tiny window the Fed created as an 'experiment' which was not supposed to be scary, that tiny window into the Outer Darkness, this small hole into the Cave of Wealth and Death has been expanding rapidly since it first was poked into the cave's wall.

All the reserves of the Federal Reserve are now gone. The ONLY way the Fed can flood the world with dollars is to beg all the other banks to give us dollars for us to give them. Got that? HAHAHA. This is how the Outer Darkness operates! Up is down and in is out. Everything is the opposite. So the Federal Reserves, which is neither federal nor has reserves, is now the conduit for flash flows of money created out of thin air....by our trade rivals.

I hammer on the issue of trade because money is just another way of saying, 'Trade'. This is why these money games the Fed has been frantically playing are called 'Swaps'. This is basically a 'bait and switch' deal which will turn into a 'switch and steal' operation. The crazy, out of balance world trade system is being kicked back into action via these fraudulent deals between the rival central banks and our foolish Federal Reserve bankers. The game here is to not let the US people know that the jig is up. That we can't run trillion dollar trade or budget deficits!

Indeed, it is not mere irony that this sum we just got via a 'swap' in London is pretty much exactly the size of our trade deficit. This is not coincidence. Or rather, in the Outer Darkness, coincidence is magic and magic is all about having things merge and then in a loud bang, flip into a new system, a new shape, a new reality.

The Derivatives Beast is the darling son of the goddess, Depression who was suckled by her sister goddess, Inflation. He is eating up all our money. The actual dollars. Not merely content with devouring equity values, he is now literally eating dollars. This is why the dollars have to now pour out of our entire system only to disappear. This money is needed to sustain global unbalanced trade. But it vanishes before it can be passed around the planet.

Lord only knows what the Dragon of China is doing with its vast, huge dollar reserves! This $630 billion infusion is one third the size of China's FOREX dollar reserves. Recently, I sat down and calculated Europe's dollar reserves and it was over $600 billion by about $50 billion. So I am also assuming this injection was actually Europe letting the Federal Reserve 'borrow' their dollar reserves!

This is ASTONISHING if it is true. It is another sign that the whole concept of a floating currency with the US as the reserve currency has now officially collapsed! Now we will see a free-for-all as our trade rivals spar to see who replaces the US as a reserve currency.

Meanwhile, the Derivatives Beast burps.

Oil, Metals, Crops Drop on Concern U.S. Bailout Plan May Fail

(Bloomberg) -- Crude oil fell the most in almost seven years, leading commodities including copper and corn lower, on concern the U.S. plan to spend $700 billion propping up America's banks will fail to avert a global economic slowdown.

Oil slumped more than $6, helping send the S&P Goldman Sachs Commodity Index to a 5 percent drop. The agreement between Treasury Secretary Henry Paulson and congressional leaders failed to cut short-term interest rates. Commodities also dropped after the pound fell the most against the dollar in 15 years and the euro weakened as European banks were bailed out.

``Oil is down because the economy is very fragile,'' said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``It's great that they were able to come to an agreement in Washington but that's no guarantee that there will be no more bank runs or that the economy will recover anytime soon.''

In depressions, money vanishes. The banking gnomes have insured that this will be the case. Note that we just went through hyperinflation. My husband said, 'This can of soup last year was 99¢ on sale. Today, there are no sales and it is now over $6 a can!' This is super-hyper inflation! How dare the Fed pretend inflation is under 3%?

The mythological creatures who control all potential wealth laugh at all this. They know that they are all forces of nature that are unstoppable once they are launched. The trajectories of their actions are predictable because they are natural. With tremendous effort, central bankers can delay the inevitable but if they do this, they make it worse since Time is Money.

Time is money is an important concept. Why is this? Simple: we are MORTALS. We die! We have limited time on this lovely planet we call 'earth'. We must do our best during the span of our hours to do the right thing. We have only one chance on this planet. So we must focus on using this time carefully and well. The value of this time is of tremendous interest to the denizens of the Cave of Wealth and Death. Note the last word! They are death gods.

We all end up visiting them in this garb. Not as givers of wealth but takers of life. The glory of being human is, we can see the gods and know their actions, habits and natures. Because of this, we can enter the Cave of Wealth but if we are smart, we do so as sparingly as possible. For they take back every bit of this wealth when we die. Or worse, they get us into situations where we kill each other before stumbling into the Cave of Death sectors.

Lehman's `100% Principal Protection' Means Pennies for Notes

(Bloomberg) -- A brochure pitching $1.84 million of notes sold by Lehman Brothers Holdings Inc. in August, a month before the firm filed for bankruptcy, promised ``100 percent principal protection.''

Buyers had ``uncapped appreciation potential'' pegged to gains in the Standard & Poor's 500 Index, the brochure said. In the worst case, they would get back their $1,000-per-note investment in three years. Only the last in a list of 15 risk factors mentioned the biggest danger: ``An investment in the notes will be subject to the credit risk of Lehman Brothers.''

This was pure fraud. All fraudsters must, by law, append a fine print note about risk. Here is the SEC filing for these splendid '100% Principal Protection' scams:

I must say, it should be drilled into everyone's head in their youth that there is NO SUCH THING AS A 100% PRINCIPAL PROTECTION SYSTEM. Period. This is because it can be wiped out by the gods. All they need to do is drop an asteroid on us, just for one example. Or have the sun go nova. Or have an ice age begin suddenly. The possibilities are endless. When Napoleon began his Grand Armee invasion of Russia, he thought he was very clever.

But way off in Indonesia, Mt. Tamboura decided to blow up! The weather went from mild and normal to one of the coldest winters on record. The following year here in New England was called 'The Year Of No Summer' and many people died of the cold and hunger. In a matter of days, the weather in Moscow went from warm to bitterest cold! And Napoleon lost his army and his throne.

Con artists always like to talk about 'a sure thing!' I always ask them, 'Why share this with little old me?' They then mutter that they need cash! Well, the only sure thing is, when you hand over cash, there is a good chance, you won't see it again. And like Goldman Sachs or Lehman Brothers or any of these con artists, they will mutter something about the weather suddenly turning cold or the horse they bet on went lame, etc. Arrest them. Conning people is supposed to be illegal.

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Global Problems Require Local Solutions

1945 Chinese yuan as hyperinflation began to take off
September 29, 2008

Elaine Meinel Supkis

Washington is basically owned by the banking gnomes. This is why the President snoozed and smoozed while thousands died in hurricane Katrina, for example. But when the banking gnomes wanted windows blasted in the walls of the US central bank so they could keep on looting everyone, they got it. And now they want a bail out now that the Fed has run out of reserves. The last point of power is the US government itself and it, too, is going bankrupt. Rapidly. Fixing this is not easy. We are all accustomed to living it up rather than being sober and careful. More banks in the G7 nations are going bankrupt or being quickly bought up by other dying banks, $1 a share. Wachovia has been eaten by Citigroup. And Citigroup is in trouble, too!

Aso, Brown Efforts to Save Themselves May Help Bush

(Bloomberg) -- Embattled political leaders in Tokyo and London may end up coming to the aid of President George W. Bush in containing the economic fallout from the credit crisis as political self-preservation trumps nationalism.

Confronting a recession, Japan's new prime minister, Taro Aso, is likely to promise tax cuts and higher spending in a bid to win a parliamentary election as early as next month. British Prime Minister Gordon Brown, who faces unrest in his party over its and his sagging popularity, may also opt for budget-busting measures to turn around the weakest U.K. economy since the early 1990s.

That would be welcome news for Bush and Federal Reserve Chairman Ben S. Bernanke because the U.S. has become so dependent on exports to generate growth -- gross domestic product, which expanded at a 2.8 percent annual rate in the second quarter, would have contracted were it not for trade -- that anything foreign governments do to stimulate their own economies is likely to help.

Aso is not a good choice for dictator of Japan. His predecessors were all driven from office as popular support of the LDP one-party rule collapses. Japan has enjoyed an amazing 6 years of growth of the top industrial powers in Japan. Exports boomed, money poured into Japan while the yen was kept tremendously cheap, falling nearly always against both the dollar and the euro for a long time. But starting last summer, on 7/17/7, this all changed. Other nations with sovereign wealth funds and huge FOREX reserves began to make the yen stronger.

Exactly one year ago today, here is Culture of Life News: Bank of Japan, Bank of China and American Speculators

China continues to evolve as an industrial power and a financial banking center. A terse message is issued by the Bank of Japan and the Bank of China. I try peering into the dark behind this message. The financial condition of the huge MITI entities in Japan, that is, Japan, Inc.---continue to grow ever more profitable and powerful while wages languish and purchasing collapses in Japan itself. Gold and commodities rise like crazy as the dollar continues its collapse against the euro and pound. The economic black hole of Japan is gradually pulling the US into a depression in several signficant ways.

First, a message from our present bankers and future rulers:

Dr. ZHOU Xiaochuan, Governor of the People's Bank of China (PBC), and Mr. Toshihiko FUKUI, Governor of the Bank of Japan, signed the renewed Currency Swap Agreement in Tokyo on September 20, 2007. This Agreement, which was signed on March 28, 2002 between both central banks under the framework of the Chiang Mai Initiative, has greatly contributed to strengthening the financial cooperation in the East-Asia region, maintaining the stability of the regional financial market and promoting the economic development in East-Asia. The renewal of this Agreement is a reflection of strengthened mutual confidence between the two sides and enhanced regional cooperation on capacity building for financial risk prevention. Besides, Governor Zhou and Governor Fukui also exchanged views on recent economic and financial developments in the two countries as well as on global financial situation and other issues of mutual interests.

Oh, and what 'recent economic and financial developments' did they discuss? I will note here that the yen has been allowed to closely track the declining dollar again. This greatly pleases Japan. I will also note that Japan has stopped echoing US demands that the yuan rise rapidly against the dollar. I sense these two Asian powers have a gentleman's agreement under the table. This must be the 'mutal interests' part of their joint statement. Also, the Chinese featured this at Xinhua news which means they are pleased with the diplomatic and other arrangements made. The Japanese are silent about this. I believe this is because they figure, if the gaijin don't read about it, they won't notice it.

Japan has enjoyed one year of happiness thanks to this deal they made with the Chinese. But the need to keep the carry trade going had one element that is now giving Japan's leaders headaches: the 0.5% savings rate set arbitrarily by the Bank of Japan supports the carry trade. The carry trade floods the world with cheap, easy credit which has two advantages for Japan: it makes the yen very weak and it encourages customers overseas to go deep into debt and buy Japanese goods. This is why Japan has been intent on keeping this game going even as it fueled global inflation!

But inflation is now in Japan and this is screwing up everything. People there are now up in arms because they had 12 years of dropping wages and now are being ravaged by inflation. So of course, being right wingers, the government is offering tax cuts. Now, the UK, US and Japan have something in common: the governments have accumulated vast past debts. All three owe more than $10 trillion each. The idea that this can grow and grow forever is insanity.

For the problem isn't interest rates, it is accumulations of debt! Even if interest is pathetic and even below the rate of inflation, debt climbs as fast as this differential so even a .5% debt payment is intolerable! Everyone on earth has been focused on keeping debt as cheap as possible. This created a mountain of debts that are utterly unsustainable. If credit was realistically priced by the US, UK and Japan, the flood of red ink would have ceased since repayment schedules would have inhibited wild overspending.

The concept that higher interest rates protect debtors and prevents them from unreasonable price inflation/debt accumulation is a key story here at Culture of Life News. I see many people wishing for a system that hands out loans at ridiculous rates so they can merrily buy, buy, buy. The US and UK are no longer major manufacturing economies. We are 'consumer economies.' And what we consume is our future credit. The cheaper Japan makes it carry trade, the worse it is on our end. Our debts soar. Whenever a central bank sees debt levels soaring and savings collapse, has to force interest rates up. This is what China did recently. The world is falling into a recession because of the Chinese raising their interest rates and choking off debt creation inside China.

This began last July and it utterly changed the flow of trade, finances and banking processes. The US is the consumer nation but China is the producer nation and so if China restricts business, it hits all the consumers of goods. Then there is oil: US warmongering coupled with excess consumption of imported oil has destroyed the US bottom line with trade. Today, thanks to the US unable to consume via cheap credit, our exports are rising and imports falling. But all our trade partners are working hard to re-establish the cheap credit/flood of exports to the US. So this is a very temporary condition.

In the last 35 years, the only times our trade deficit shrinks is during global recessions! This shows us clearly that the NATURAL reset system wants to work! But none of our trade rivals want it to work. So it is short-circuited before it fixes the mess here. And our cumulative debts grow.

Global authority can fill financial vacuum
By Jeffrey Garten

Even if the US’s massive financial rescue operation succeeds, it should be followed by something even more far-reaching – the establishment of a Global Monetary Authority to oversee markets that have become borderless.
*snip*
That vacuum at the centre is dangerous for everyone. The US’s dependence on massive inflows of foreign capital, roughly $3bn (€2bn, £1.6bn) a day, will surely increase now as Uncle Sam acquires $1,000bn in new obligations from current bail-outs. For years to come, Wall Street and Washington will be unable to manage without strong co-operation from other markets.

Beyond that, the international dimensions of finance are mind-boggling. Global assets have increased from $12,000bn in 1980 to nearly $200,000bn in 2007, far outstripping the growth of gross domestic product or the expansion of trade.

NEW WORLD ORDER ALERT!!! HAHAHA. Yes, there will be a Global Monetary Authority. Let's call it MAO for short. Heh. Monetary Authority Organization.

This is a typical, childish view of the world. Mr. Garten can't figure out that a group of G7 debtor nations cannot go to Japan and China and OPEC with an equal vote in such an organization. This is like having South America run the IMF! Impossible. The creditor nations will join with each other AGAINST the debtor nations. This is natural. Just like when the world went bankrupt and the US was solvent after WWI and then WWII. The US was the top voting entity in global trade and banking organizations.

The new MAO authority will be imposed on us when we finally go bankrupt. The passage of the TARP banking bail out will simply move us closer to bankruptcy. Just as the totally irresponsible war spending bill passed this week is bankrupting us. It appears that no one in control of things except for a very few, are able to see the obvious end result of all this over-spending.

Click here to see the wonderful Dennis Kucinich video of his one minute testimony in Congress on Sunday: Is this the U.S. Congress or the Board of Directors at Goldman Sachs! + Sounds Like Insider Trading To Me!

Back to Garten at the Financial Times:

All of these considerations point to the eventual need for a new Global Monetary Authority. It would set the tone for capital markets in a way that would not be viscerally opposed to a strong public oversight function with rules for intervention, and would return to capital formation the goal of economic growth and development rather than trading for its own sake.
*snip*
The GMA’s board would have to include central bankers not just from the US, UK, the eurozone and Japan, but also China, Saudi Arabia and Brazil. It would be financed by mandatory contributions from every capable country and from insurance-type premiums from global financial companies – publicly listed, government owned, and privately held alike.

Trade for its own sake? Gods! Talk about stupid. This is what happens when a culture becomes a consumer nation: people become as dumb as Thanksgiving turkeys on the last Wednesday of November! Capital formation is continuing....outside of the US and UK! And this 'trade' is our rivals selling us lots of stuff we want. If we didn't want it, we wouldn't buy it. Instead, we not only want it, we want to go into debt to these same 'trading for its own sake' entities in Asia so we can buy this trade stuff! Duh. This is the whole problem.

This Brit also wants a global tax. Not on ourselves, we will be the debtor/consumers! No, the sovereign wealth funds, the successful manufacturers and traders will be taxed...so we can consume. This is so stupid, I am not speechless. Heh. Try selling this idea to China!

They will want MAO only if they have veto power. Then they will be happy to lend to us as we consume.

The Insanity of the $700 Billion Giveaway

By MICHAEL HUDSON

The real mad money

This is not what the magic of compound interest promised. But it is where it had to end up, with mathematical inevitability. It was an advertising come-on for Wall Street money managers and promoters of “pension-fund capitalism” (or “peoples’ capitalism” as it was called in Chile by the Chicago Boys working for General Pinochet’s murderous regime, and Margaret Thatcher’s Conservatives in England). The promise is that if people consign these funds to individuals who make much, much more than they do but have the survival-of-the-fittest advantage of being much, much more greedy, they will receive a perpetual doubling of interest. That is how retirements for American workers are still supposed to be paid – by magic, not by direct investment. Prospective retirees are supposed to ensure a good life by investing savings in loans to corporate raiders who fire, lay off, downsize and outsource these very workers. The trick is to persuade employees to hand retirement funding over to financial managers whose idea was to make money off the economy by extracting interest and dividends off workers, homeowners and companies being bought on debt leverage. In the final analysis it is debt leverage by itself that is supposed to fuel capital gains.
*snip*
So here’s where the cognitive dissonance comes in: It is necessary, even inevitable, for the volume of debt to come down – not up – to restore equilibrium. The economy was well on its way to preparing the ground for this last week. As Alan Meltzer of the American Enterprise Institute (of all places!) explained on McNeill-Lehrer, Merrill Lynch was able to be sold at 22 cents on the dollar; and the economy survived Lehman Brothers and Bear Stearns being wiped out.

Such debt writes-offs are a precondition for writing down America’s mortgage debts to levels that are affordable. But Mr. Paulson’s plan is to fight against this tide. He wants the Wall Street to keep on raking in money at the expense of the economy at large. These are the big banks who lobbied Congress to appoint de-regulators, the banks whose officers paid themselves enormous bonuses and gave themselves enormous golden parachutes. They were the leaders in the great disinformation campaign about the magic of compound interest. And now they are to get their payoff.
*snip*
The “magic of compound interest” refers to the tendency of savings to double and redouble exponentially, with a matching rise in what debtors owe on the other side of the balance sheet. These mathematics have been operated throughout history, ever since the charging of interest was invented in Sumer some time around 2750 BC. In every known society, the effect has been to concentrate wealth in the hands of people with money. In recent years, one’s own money is not even necessary to do this. The power to indebt others to oneself can be achieved by free credit creation. However, the resulting mushrooming exponential growth in indebtedness must collapse at the point where its interest and other carrying charges (now augmented by exorbitant late fees, bounced-check fees, credit-card costs and other penalties) absorb the entire economic surplus.

This long screed against compound interest ending with a call for all of society to have debt forgiveness periods is a sign of how desperate our collective debt-raddled society has become! Back when interest rates were raised rapidly above the rate of inflation, a flood of savings poured into the banking system. And banks ceased dying. Banks paying interest on savings, call this 'debits'. And loans are 'assets'. But without the 'debits' there can be no lending. This forces banks to curb lending. No need for savings leads to wild lending which leads to too much cheap debt.

The desire to go deep in debt and then smirk as it is all erased is very enduring. For thousands of years, this has been the ideal. It also leads to no banking! Who, in their right mind, would save money, lend it out so it 'grows' only to see the person who borrows it skip off with not only not paying for the risks of lending but also, keeping the principal? Impossible. This is why we still dig up money across the planet. Whenever a culture follows this solution, savers cease lending and bury their money. We saw this in the Great Depression, for example.

Savings vanish. And since interest rates don't give much return at all in the US, few people are saving. Everyone is rushing to build up debt. This is now collapsing because too much debt was poured on top of things, thus leading to the temptation of shirking paying loans. We already have a mechanism: bankruptcy. But people bought houses at inflated prices, for example, thanks to cheap lending. Now, they want to still live there...gratis. There would be no 30 year loans for houses if we had jubilees that eliminated debt. No one would lend if such a day were approaching. How obvious is this, anyway?

European Regulators Move Swiftly to Rescue Lenders

Just days after Washington brokered the sale of Washington Mutual, the largest American savings and loan, regulators in Britain and Belgium swooped in to engineer rescues of two leading banks with heavy exposure to soured mortgages.

In the latest sign of trouble to hit Europe from the global credit crisis, the Belgian, Dutch and Luxembourg governments announced Sunday a partial nationalization of the Belgian-Dutch financial conglomerate Fortis, involving a combined injection of 11.2 billion euros, or $16.1 billion, from the three governments, which took a 49 percent stake.

Prime Minister Yves Leterme of Belgium, who was joined Sunday by the European Central Bank president, Jean-Claude Trichet, in an unprecedented appearance, announced the accord after a weekend of emergency talks in which the governments had tried to broker a whole or partial sale of the bank to private bidders.

All the G7 nations but Japan are nationalizing all their banking systems. This wave of nationalization sweeping the top financial banking systems is a sign that all are overexposed and all lent far beyond their means. And the era of cheap interest lending was FAKE. I remember how everyone was marveling at the miracle of no inflation. Even as oil prices began their historic, relentless climb and gold shot upwards, everyone at the helm of the G7 nations were smug about cheap lending. Indeed, the US rashly dropped rates to 1% when oil and gold were rapidly climbing!

Instead of being arrested for fraud, reckless endangerment and theft, these same banking gnomes that flooded the world with easy credit right when inflation was certainly taking off are now taking over our governments. For these nationalizations are basically all political coups. Only if the bankers are arrested, will this be seen as a change in power. Instead, they now are gaining a tighter grip on us all. And they intend to MAKE LENDING CHEAP AGAIN. They are killing bears, stripping savers, crushing investors all, while dropping interest rates to borrowers. This is very wrong.

Citigroup to Buy Wachovia Banking Operations for $1 a Share

Citigrouphas agreed to buy Wachovia’s banking operations for $1 a share, a move that that would concentrate power within the nation’s banking industry in the hands of a few giant lenders, The New York Times’s Eric Dash and Andrew Ross Sorkin reported Monday morning.

The Federal Deposit Insurance Corporation said in a statement on Monday that Citigroup will assume Wachovia’s senior subordinated debt, and emphasized that Wachovia did not fail.

Although the Federal Reserve and Treasury Department were pushing for a sale, the government was resisting pressure to provide financial guarantees to the buyer, which both Citigroup and Wells Fargo had sought.

The sale to Citigroup further concentrates Americans’ bank deposits in the hands of just three banks: Bank of America, JPMorgan Chase and Citigroup would control more than 30 percent of the industry’s deposits.

Look at the graphs: last Friday, Wachovia was $10 a share, not $1. Wachovia's stock history:

The hockey stick graph is obvious, leading up to the 2000 stock market crash. But the second hump is the result of the 1% rescue of the spendthrifts by Greenspan. So there was a fake, shadow bubble which finally burst, killing the bank. The entities buying up Wachovia, Countrywide, etc are all in deep trouble. All of these remaining players on this Hamlet death duel are all equally exposed. Indeed, the derivatives exposure is in the hundreds of trillions of dollars. This is why these rescues are happening simultaneous with frantic law making. The screams we hear are the bankers opening their safes to find the Derivatives Beast inside, munching up all their wealth.

Adolf Hitler, September 16, 1930:

THIS election means that the circle is now complete. And the question at this time is: what are the aims of this opposition and its leaders?

It is a fight for an idea - a Weltanschanung: and in the forefront stands a fundamental principle: Men do not exist for the State, the State exists for men. First and far above all else stands the idea of the people: the State is a form of organization of this people, and the meaning and the purpose of the State are through this form of organization to assure the life of the people. And from this there arises a new mode of thought and thus necessarily a new political method.

We say: a new mode of thought. Today our whole official political outlook is rooted in the view that the State must be maintained because the State in itself is the essential thing; we, on the other hand, maintain that the State in its form has a definite purpose to fulfill and the moment that it fails to fulfill its purpose the form stands condemned. Above everything stands the purpose to maintain the nation's life - that is the essential thing and one should not speak of a law for the protection of the State but for the protection of the nation: it is of this protection that one must think.... In the place of this rigid formal organization - the State - must be set the living organism - the people. Then all action is given a new untrammelled freedom: all the formal fetters which can today be imposed on men become immoral directly they fail to maintain the people, because that is the highest purpose in life and the aim of all reasonable thought and action.

Germany didn't want to pay its debts. It threw in the towel. In September, 1930, the US banking system was still operational. When the Germans went bankrupt, the waves sloshed over to here and triggered the second panic of 1931-1933 as everything collapsed. The systems set up back then were nearly all discarded except for government insurance of bank accounts of savers. The FDIC was deliberately starved of money so it, too, might fail. Thus, the panic.

A spendthrift nation can't fix itself by declaring bankruptcy. If this hurts China, it will destroy us as surely as the same wild behavior in Germany, 1930 led to its nearly total destruction a mere 15 years later. The US was made stronger by WWII even though its banking system collapsed. This was because our government was solvent and it moved rapidly to protect itself from a flood of cheap imports.

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Matt Blackman Hates Debating Me About Japan

September 28, 2008

Elaine Meinel Supkis

I periodically torment the geniuses published by Seeking Alpha. When a featured writer is particularly dense, I try to educate him or her, mostly males. Here is a classic example of a guy who says something stupid and who gets mad when I begin a real debate. It reminds me of all those famous economic professors who run blogs online. The instant we begin to debate Japan, they go nuts. They cannot understand something that is painfully obvious to me: the top levels of Japanese money and power are NOT in a depression/recession or anything nasty! They are taking over everything the Chinese can't nail down, themselves! They are growing vastly more powerful, fast!

Matt Blackman at Seeking Alfalfa: Fooling Around a Financial Black Hole

These misguided bailouts and bans may seem like a good idea at the time and appear to have gained public support if recent election polls are any indication. But this action does not change the inevitable albeit painful reality.

Recessions are a necessary part of maintaining healthy capital markets long-term. They remove excesses that have been built up over years of easy money and rapidly appreciating asset prices as the inevitable bubbles build. To try to interrupt this cycle makes about as much sense as trying to suspend the law of gravity. The problem is that such action only extends the pain that in its worst form turns into a Japan-style economic recession that lasts decades instead of a year or two.

As always, I can't resist it when a deluded American spouts Japanese propaganda. Japan needs desperately to have Americans believe they are in this miserable depression so the US won't demand the yen be stronger and the giant trade surplus Japan has with the US, be closed. Japan will artfully whine, 'We can't buy your exports because we are in a depression!'

But this is a lie. The wages of workers in Japan are very depressed. So they can't buy imports from America. Or even their own stuff. But exports are booming and Japan's top corporations are rapidly rising in global trade and are dismantling American markets and overtaking and overwhelming the biggest American manufacturing corporations. This is a catastrophe for the US and is a very important issue. So, look at how this pathetic economics advisor reacts when I give him useful information:

Culture of Life News here!

Japan's 'recession' ended YEARS ago! They had an average GNP growth bigger than the US during the last 5 years. They have the biggest export profits on earth next to the Germans!

Their economy has grown greatly and their international economic power has doubled in the last 5 years. They even have 2.3% inflation this last year!

Japanese WORKERS have suffered hideously. Thanks to the LDP, their wages have been ruthlessly cut and they are unable to buy cars now, for example. But Toyota's car sales have soared due to exports.

The workers suffer in order to keep the yen cheap so Japan can export. This is their problem. NOT some sort of 'depression'.

Few commentators on the economy bother to read Bank of Japan statistics which they publish every quarter. It is a real eye-opener. Repeating mindlessly old propaganda is a sign that this analyst, Mr. Blackman, is ill informed.

The US government can bail out the economy ONLY if it is solvent. It is not solvent. These bail outs are based on the quicksand of vast and growing government debts.

Matt tries to debate me:

Elaine;
Just take a look at the Nikkei225. On Friday it closed a hair about 12,000, 70% below where is it was trading in 1990. That is a moribund performance not matter what you choose to call it. You are incredibly naive if you rely on "official statistics" from any central bank or government including the BoJ which by the way, has shameless manipulated the yen to keep in artificially low. And as you said it yourself, Japanese workers have suffered "hideously" because real growth has been abysmal even in the face of near zero overnight lending rates for the last 15 or more years. It is also why the carry trade has been so successful as traders effectively shorted the yen to go long currencies like the Icelandic krona or New Zealand dollar.

I'm a trader and its not the recession I follow because by the time a recession is "officially" confirmed, my portfolio is in tatters, its the bear market. My point is that the myriad of bailouts and misguided market impediments (like the short ban) has the potential leave us in a position with a multi-decade bear market like Japans' with moribund economic real performance like Japan. Please spare me the economic lecture. Anyone who thinks that real economic performance in Japan has been impressive over the last two decades is delusional.

He isn't just a 'trader'---I bet he is one of the many thousands of water-carries for the Japanese carry trade. Everyone is desperate to believe there is a depression, not raging inflation, in Japan. If we all demand Japan raise interest rates to the levels required for inflation, it wouldn't be 0.5%, that is certain! But if they raise it, that kills the carry trade. And many US 'investors' desire this hideous and totally noxious carry trade to expand, not vanish.

So I debate Matt some more:

Just as the value of the yen doesn't matter so long as it is weak, ditto the Nikkei.

LOOK AT THE TRADE STATS. That is what matters. As Japan reams us out, they care only about that matter. Look at the US workers: they are being treated to the same 'depression for workers/expansion for exporters' business. We cannot understand what is happening unless we understand the ultimate goals of free trade: to decimate the earnings of workers in all the first world nations.

So when we look at statistics, we have to differentiate between debt and credit, the value of workers versus profits for export powers, etc. The US is the dying nation since it has a national budget deficit that is worsening, a trade deficit that is nearly a trillion dollars a year and is being rapidly deindustrialized.

Japan is NOT being deindustrialized. The workers there are being demonetarized. They are losing fiscal power. But Japanese manufacturing is growing stronger, not weaker. And of course, it is also expanding across the planet. Toyota, not General Motors, is now the global #1 power in the auto manufacturing fields.

As for central banks lying: why would the Japanese boast about their progress? Eh? They do this happily, AT HOME. I read the Nikkei News every day. When the yen goes up against the dollar, they whine. When it goes down, they celebrate.

This is because profits selling in the US goes up when the yen gets weaker.

Indeed, Japan doesn't want you, Matt. Fortress Japan doesn't want Chinese investors. Nor Americans or Europeans. They want you to think they are 'moribund' while they strong arm all markets and drive out our own corporations. I know this is impossible for Americans to understand but it is laughably easy for Asians to understand: they are all playing the same game the Japanese are playing.

I am betting Matt will demand that Seeking Alpha cease seeking anything and banish people who dare to disturb his sleep. The fact that he sinks instantly into insults and threats is very typical of small minds. But then, I am insulting him here. Of course. But then, he deserves this. On the other hand, if he came here, we would all happily chat with him. I could bombard him with hundreds of cartoons about Japan and the carry trade/yen business.

Here is poor Matt, imitating Paulson's impersonations of Gollum:

Elaine;
You are trying to turn this into your own personal soap box. I'm not sure what your agenda is but it certainly isn't about investing or trading. Take it elsewhere.

This forum is devoted to serious investors, not wannabe economists with some other agenda that quite frankly has little to do with the topic of my article.

Japan has been engaged in a 20 year bear market by definition, and one which is you obviously have little understanding. After seeing value decimated over the last twenty years in Japanese stocks since 1990, the Japanese investor has my deepest sympathies and if we pursue bailout economics in the US, we will see the same pathetic long-term performance.

You have clearly demonstrated that you have little understanding of how markets work and what a bear market is.

I always find people who appear in a public forum seeking to spout out wisdom and great debate powers always collapse when someone doesn't agree with them. This desire to control debates by eliminating anyone who argues is classic. This is why so many people never learn anything new. When you debate someone who is shot dead, for example, your world image remains intact. But this doesn't help much when reality is going totally haywire.

So I attack this idiot Matt with a low blow because he pisses me off:

You can't stand debate with a woman, can you? Ha.

Look, Japan has something the US doesn't have: A TRADE SURPLUS. They are not the same as us. We have tremendous debt...held by foreign powers including and especially, Japan! True, their stocks aren't forming huge bubbles like ours.

This is because they don't want YOU in their markets! They want to be the ones shopping, here. And they are now buying up our banks. Some depression, eh?

We are up to our eyeballs in debt and this has been enabled by the Japanese carry trade. But I am not an 'investor' like you...I am an INVESTIGATOR. Heh. Huge difference.

If anyone wishes to have fun with Matt, be my guest. I suppose eventually the Seeking Alpha people will ban me because I don't mouth the same lines everyone is mouthing. But then, isn't this how we got in trouble in the first place? Walking in lock-step, ignoring reality? Imagining something was working when it was broken? Taking the wrong road all the time?

Ignoring important data, refusing to look at everything at once? Heh. Lost, like lambs driven off the cliff by wolves.

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TARP Is Thrown Over Roofless Banks

September 28, 2008

Elaine Meinel Supkis

I just got the TARP bill. Some in Congress hope to torpedo this bill but I don't think they can succeed since the top people want it passed no matter how unpopular it is. Each opponent is given one minute to register their ire. Maybe yelling, 'YOU WILL BE SORRY!' should be used? Well, it will pass like all the other Hail Mary passes thrown by the central banks, the leaders and the legislators have worked: not at all. For far from probing what is wrong, they are throwing a tarp over the burning bank business in the hopes this will smother the whole mess. It won't work. And that is due to the fact, the Derivatives Beast is bigger than the banks.

$700-billion Wall Street bailout plan is unveiled

The House is likely to vote on the bill Monday, congressional staffers said. But the plan faces fierce opposition from Republicans and Democrats angry at what they say is a taxpayer bailout of Wall Street "fat cats." As the House opened for an unusual Sunday session, lawmakers from both parties rose, one after another, for one-minute speeches denouncing the agreement -- and signaling a continuing struggle as policymakers and their staff work out the final details.

"This morning we should be very much alarmed," said Rep. Scott Garrett (R-N.J.), addressing taxpayers directly. "Obviously, Washington is not listening to your wishes. Those who used to work for Goldman Sachs will support this deal. . . . Those who have blocked reform in the past will support this deal. I will not support this deal."

Rep. Marcy Kaptur (D-Ohio) railed against the agreement and the Wall Street financiers who would be helped. "These criminals have so much political power they can shut down the normal legislative process," she said.

Rep. Ted Poe (R-Texas) rose to compare the administration's urgings to rush a bailout plan to the pressure exerted on Congress to act after the Sept. 11 terrorist attacks.

"This is the same politics of fear we're hearing from the financial fat cats on Wall Street," Poe said. "Backroom deals trouble me because they usually turn out to be bad deals for America."

The conservative Texan was followed and echoed by the staunchly liberal Rep. Dennis J. Kucinich (D-Ohio), who said, "The $700-billion bailout is driven by fear, not fact."

Since the Derivatives Beast is bigger than the entire banking system of the entire planet earth, yes, fear is called for. 'Oh my god! Look at that thing! It is taller than the Burj Dubai, whatever that is!' Or, 'It is bigger than Madonna's pointy bras!' Or how about, 'It is as big as the garbage circling in the North Pacific Gyre!' Finding the appropriate metaphor is hard work for this thing the bankers, themselves birthed and bred, raised and fed is bigger than all other monetary, banking, economic or any other possible thing we use numbers to describe. Except for Zimbabwe inflation which is now totally in the grip of the Goddess of Inflation who is happily running that up to infinity pretty fast.

This is what happens when we dwaddle for several years: instead of focusing on what is obviously wrong from the get-go, we end up screaming and running in circles. Everyone wants to fix this mess but fixing it is impossible unless we first recognize what is wrong! This takes time. Alas, it requires overcoming vast seas of money injected into the political system to encourage our Representatives to not look at the monster, this Beast, as it was growing. So instead of attending to its vast girth and size, it was studiously ignored.

Now that it wants to eat its fathers who fed it the rest of the planetary financial systems, now Congress and the ruler of America wake up from their happy dreams to lasso this creature. Only they are not doing this! They want to feed more money into a system that had epic, huge, insane amounts of money, both fake and counterfeit, flooding the entire economic systems!

Click here for the PDF of the entire proposed bill:

SEPTEMBER28, 2008
110THCONGRESS 2nd SESSION H. R. ll

To provide authority for the Federal Government to purchase certain types of troubled assets for the purposes of providing stability to and preventing disruption in the economy and financial system and protecting taxpayers, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES: A BILL

To provide authority for the Federal Government to purchase certain types of troubled assets for the purposes of providing stability to and preventing disruption in the economy and financial system and protecting taxpayers, and for other purposes.

I lived in a tent complex for ten years. It was covered with huge tarps. Every fall, I would have to recover the entire thing with new tarps. If I failed to do this, the entire thing would disintegrate. Once, when it was a very stormy year, I had to put on the annual tarps in a very violent windstorm. I had to use logging chains and the ox team to yank it over. At one point, I lost control of the tarp and it whipped up into the air. It flapped with great energy and I hauled on the lines to pull it back down. The oxen strained to haul it over the peak and I had to tie it to the oak trees on the forest side.

It was very frightful. So I know all about tarps! Having lived under them for ten years, I assure everyone, solid roofs are far, far better! And this bill is no solid roof over the US economy. It is a temporary tarp that will flap in the economic winds even if we tie it down with logging chains.

The TARP Bank Bail Bill:

SEC. 2. PURPOSES. The purposes of this Act are—

(1) to immediately provide authority and facilities that the Secretary of the Treasury can use to restore liquidity and stability to the financial system of the United States; and

(2) to ensure that such authority and such facilities are used in a manner that—

** (A) protects home values, college funds, retirement accounts, and life savings;

**(B) preserves homeownership and promotes jobs and economic growth;

**(C) maximizes overall returns to the taxpayers of the United States; and

**(D) provides public accountability for the exercise of such authority.

Good grief. Talk about a lunacy! First, the reason we no longer have 'liquidity' is because we don't have 'stability'. No nation running trade, government budget and its savings in the red can lend more and more money to itself. It just cannot! This is the very definition of 'instability'. Congress knows this and ignores this. They stupidly and maliciously voted to spend nearly a trillion dollars on our flagging empire of military domination of this planet! The misspending in this sector is amazing. And it grew by 6%, a totally unsustainable growth rate!

Now, the Treasury is supposed to 'protect home values'. HAHAHA. If this is so, then first we must reset values to reflect reality. The definition of any bubble is, it is too expensive. When the Tulip Mania began to collapse, there were government moves to maintain the value of bulbs at the bubble rates. So all sorts of things were tried. For example, forcing people backing out of contracts to pay up. All this did was cause the remaining funds to flee Holland!

Every time any bubble pops, the same thing happens: the government wages a futile battle to drive values of grossly overpriced equities or commodities back to the highest points when the bubble burst! The futility of this is painfully obvious! This is why, by 1900, it was universally recognized that bubbles were bad! This is the excuse JP Morgan and the others gave for forming the Federal Reserve: they would prevent bubbles using their superior knowledge.

HAHAHA. Being a bunch of gnomes, they couldn't do this. Instead, they would lie low until enough people forgot the many stupid things the Federal Reserve's banking gnomes did behind closed doors and a new bubble is launched. They became the ones who would launch bubbles by loosening lending to the point, anyone could get a loan for any reason, even to bid up tulip bulb values.

All the pious talk about making us all richer as well as encouraging industry, etc is all hogwash. Industry is dying in America. It is dying thanks to the Japanese carry trade, free trade and our desire for oil imports as well as cheap consumer goods. This TARP bill fixes none of this.

TARP torpidity:

FUND.—The term ‘‘Fund’’ means the Troubled Assets Insurance Fund established under section 102.
*snip*
(8) TARP.—The term ‘‘TARP’’ means the troubled asset relief program established under section 101.

(9) TROUBLED ASSETS.—The term ‘‘troubled assets’’ means—

(A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary determines promotes financial market stability; and

(B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.

This was due to Gollum Paulson demanding a Ring of Power. He wanted to decide which tulip bulbs to buy and thus, support Goldman Sachs traders who hold a zillion bulbs of every description. Now, this must get past a committee. Rats, says Gollum. He will eat raw fish tonight.

TARP topsy turvy:

b) MEMBERSHIP.—The Financial Stability Over-
sight Board shall be comprised of—(1) the Chairman of the Board of Governors of the Federal Reserve System;

(2) the Secretary [Treasury];

(3) the Director of the Federal Home Finance Agency;

(4) the chairman of the Securities and Exchange Commission; and

(5) the Secretary of Housing and Urban Development.

(c) CHAIRPERSON.—The chairperson of the Financial Stability Oversight Board shall be elected by the members of the Board from among the members.

NOT ONE OF THESE CLOWNS IS ELECTED. They are all untouchable by voters. This kind of reminds me of things like 1789 France!

The immediate trigger for the Revolution was King Louis XVI’s attempts to solve the government’s worsening financial situation. In February 1787, his finance minister, Loménie de Brienne, convened an Assembly of Notables, a group of nobles, clergy, bourgeoisie, and bureaucrats selected in order to bypass the parlements, special courts with the power to register royal edicts, who saw themselves as upholders of traditional constitutional constraints on the monarchy. The Controller-General of Finances, Charles Alexandre de Calonne, asked the Notables to approve a new land tax that would, for the first time, include a tax on the property of nobles and clergy. The assembly did not approve the tax, but instead demanded that Louis XVI call the Estates-General, a representative assembly of the estates of the realm, last called in 1614. On 8 August 1788, the King agreed to convene the Estates-General in May of 1789. By this time, Jacques Necker was in his second turn as finance minister.

I will note here that nearly every Republican at the hearings I was at demanded tax cuts, not meaningful reforms! They don't want to pay ANY taxes! Just like France 200 years ago, the US is in a tax crisis that isn't being fixed. It is being made worse. France declared bankruptcy with its revolution and fixed the ensuing mess with Napoleon setting out to loot all neighboring countries. Hitler tried to fix Germany's financial woes the same way. This committee is all appointed members who were appointed by Bush. They are about the least trust-worthy people in America.

This is a way for Congress to avoid responsibility for the mess we are in. They voted to undo all the Great Depression laws, for example. The GOP who ran things when this stupidity was created are no longer in charge but I don't see the Democrats rushing to fix this, either.

TARP targets:

SEC. 105. REPORTS.

(a) IN GENERAL.—Before the expiration of the 60-day period beginning on the date of the first exercise of the authority granted in section 101(a), whichever date is earlier, or of the first exercise of the authority granted in section 102, whichever occurs first, and every 30-day period thereafter, the Secretary shall report to the appropriate committees of Congress, with respect to each such period—
*snip*
(5) SPECIAL RULE FOR APPLICATION TO EMPLOYERS PARTICIPATING IN THE TROUBLED ASSETS RELIEF PROGRAM.—

‘‘(A) INGENERAL.—In the case of an applicable employer, no deduction shall be allowed under this chapter— ‘‘(i) in the case of executive remunera- tion for any applicable taxable year which is attributable to services performed by a covered executive during such applicable taxable year, to the extent that the amount of such remuneration exceeds $500,000,

All they get is a measly half a million. Rats. I live on about 20 times less than that.

TARP Legal eagle stuff:

(A) INJUNCTION.—No injunction or other form of equitable relief shall be issued against the Secretary for actions pursuant to section 101, 105, or 108, other than to remedy a violation of the Constitution.

(B) TEMPORARY RESTRAINING ORDER.— Any request for a temporary restraining order against the Secretary for actions pursuant to this Act shall be considered and granted or denied by the court within 3 days of the date of the request.

(C) PRELIMINARY INJUNCTION.—Any request for a preliminary injunction against the Secretary for actions pursuant to this Act shall be considered and granted or denied by the court on an expedited basis consistent with the provisions of rule 65(b)(3) of the Federal Rules of Civil Procedure, or any successor thereto.

(D) PERMANENT INJUNCTION.—Any request for a permanent injunction against the Secretary for actions pursuant to this Act shall be considered and granted or denied by the court on an expedited basis. Whenever possible, the court shall consolidate trial on the merits with any hearing on a request for a preliminary injunction, consistent with the provisions of rule 65(a)(2) of the Federal Rules of Civil Procedure, or any successor thereto.

(3) LIMITATION ON ACTIONS BY PARTICIPATING COMPANIES.—No action or claims may be brought against the Secretary by any person that divests its assets with respect to its participation in a program under this Act, except as provided in paragraph (1), other than as expressly provided in a written contract with the Secretary.

(4) STAYS.—Any injunction or other form of equitable relief issued against the Secretary for ac- tions pursuant to section 101, 105, or 108 shall be automatically stayed. The stay shall be lifted unless the Secretary seeks a stay from a higher court within 3 calendar days after the date on which the relief is issued.
*snip*
(a) TERMINATION.—The authorities provided under sections 101(a) øand 102¿ shall terminate on December 31, 2009.

So, this semi-dictatorship will be for only one year? Well, the banking collapse of the Great Depression lasted for 4 years. And the depression itself lasted until WWII took care of things by destroying most economies, many cities and many millions of innocent civilians.

NYT: Citigroup and Wells Fargo were locked in a bidding war on Sunday over a possible emergency takeover of the Wachovia Corporation, people involved in the talks said.

The intense negotiations come as concern grew about Wachovia’s stability on Friday, these people said, despite a breakthrough reached Sunday by Congressional negotiators on a $700 billion bailout for the financial system.

The government, led by the Federal Reserve and Treasury Department, has been involved in the talks as well, these people said. But so far, the government is resisting pressure to help bidders by guaranteeing a part of Wachovia’s assets the way it did for Bear Stearns when it was sold to JPMorgan Chase in March.

The government has also opposed taking over Wachovia the way it did Washington Mutual last week, these people said, unless its financial position deteriorates more rapidly.

Now, on to the Derivatives Beast: Wachovia is in trouble but not to the degree that JP Morgan is in trouble with this critter. When a bank has plenty of goodies, the sharks want a bite. There is plenty of gaming still going on. The collapse is seen as opportunity still.

In Financial Food Chains, Little Guys Can’t Win

Second, according to what I hear from my betters in the world of finance, the most serious problems are not with the bundles of subprime mortgages themselves — a large but not lethal quantum as far as I can tell — but with derivatives contracts tied to subprime and other dicey debt. These contracts are superficially an attempt to “insure” against risks of default, hence the name “credit-default swaps.” In fact, they are an immense wager — which anyone with lots of money or borrowing ability can enter — about how mortgage-backed bonds, leveraged loan bonds, student loan bonds, credit card bonds and the like will perform.

These wagers entail amounts many times larger than the total of subprime loans. In fact, there are roughly $62 trillion in credit-default swap derivatives out there, compared with about $1 trillion of subprime mortgages. These derivatives are “weapons of financial mass destruction,” in the prophetic words of Warren E. Buffett. (Apparently believing that the worst is over, at least for one big investment bank, Mr. Buffett is now investing in Goldman Sachs.)

The swaps market has been unregulated. It has been just a lot of people making bets with one another. Some of them made incredibly fortunate payoff wagers against the mortgage bonds, using credit-default swaps as their wagering vehicle. I am not sure who the big winners are, but they are out there, and the gains were big enough to cripple the part of Wall Street on the losing side of the bets.

The Office of the Comptroller of the Currency issues reports and puts out news bulletins. The last Derivatives Report was last year. There has been nothing but silence since then. But we shall revisit these matters tonight as a refresher as to why JP Morgan is really a Dead Man Walking The Plank, not a healthy banking entity. And we shall see why Goldman Sachs ran off to become a mere bank. Since they are not regulated, we have no idea what sort of garbage GS has. But we can guess!

OCC’s Quarterly Report on Bank Derivatives Activities

Third Quarter 2007

Executive Summary

• U.S. commercial banks generated $2.3 billion in revenues trading cash and derivative instruments in the third quarter of 2007, down 62% from the $6.2 billion reported in the second quarter. This decline is attributed largely to the difficult trading environment in credit markets.

• Net Current Credit Exposure increased $53 billion, or 27% from the prior quarter, to $252 billion.

• The notional amount of derivatives held by U.S. commercial banks increased $19.7 trillion to $172.2 trillion in the third quarter, 13% higher than in the second quarter. Bank derivative contracts remain concentrated in interest rate products, which represent 81% of total notionals.

• The notional amount of credit derivatives, the fastest growing product in the derivatives market, increased 19% from the second quarter to $14 trillion. Credit default swaps represent 98% of the total amount of credit derivatives.

CLICK ON ALL IMAGES TO ENLARGE!

OCC Derivatives Report 2007:

The notional amount of credit derivatives in the third quarter of 2007 rose $2.2 trillion, or 19%, to $14.0 trillion. Contracts referencing investment grade entities with maturities from 1-5 years represent the largest segment of the market at 43% of all credit derivatives notionals. Contracts of all tenors that reference investment grade entities are 73% of the market.

The notional amount for the 30 U.S. commercial banks that sold credit protection (i.e., assumed credit risk) was $6.2 trillion, an increase of $0.9 trillion from the second quarter. The notional amount for the 36 banks that purchased credit protection (i.e., hedged credit risk) was $7.8 trillion, an increase of $1.3 trillion.

As is often the case with a new and rapidly growing market, operational issues became a supervisory concern in the credit derivatives market in recent years. Currently, the OCC is working with other financial supervisors and major market participants to address infrastructure issues in credit derivatives. While significant progress has been made, the increase in credit derivatives volumes in the third quarter put a strain on processing systems, reminding the industry and supervisors of the need to identify permanent solutions to the efficient processing of credit derivatives transactions. This collaborative process is also being applied to address the processing of equity and other derivatives products, as well.

Revenues Trading revenues from cash instruments and derivative products totaled $2.3 billion in the third quarter of 2007 for all insured U.S. commercial banks, down 62% from the near-record level of $6.2 billion in the second quarter of 2007. Of the trading revenue components, interest rate revenues were the strongest, increasing 3%, or $102 million, to a record $3.1 billion. Foreign exchange revenues were also notable at $2.0 billion, a 59% increase from the previous quarter. The credit market turmoil in the third quarter caused revenues from credit trading to fall $3.5 billion to a loss of $2.7 billion. The losses in credit trading resulted from the sharp increase in credit spreads that occurred in the third quarter, creating a difficult environment for trading and hedging, particularly against correlation risks. Overall client demand was healthy as bank clients engaged in derivatives contracts to offset risks arising in highly volatile market conditions.

Look at the chart below that lists the derivatives exposure of the top 5 banks that are the ones doing 85% of the derivative trades or swaps:

Home equity LTV, according to the OCC, has tightened up by 89%. An amazing degree. All equity lines from real estate to credit cards have tightened up by more than 35%.

YIKES! The numbers are insane! JP Morgan, in particular, is the proud daddy to nearly $100 trillion in derivatives? Seriously, this is utter insanity. And how is this banking bill going to fix this stuff?

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Bank Bail Bill Blesses Goddess Of Inflation

September 28, 2008

Elaine Meinel Supkis

Everyone is now trying analyze the latest futile debt spending spree of the desperate US as we try to restore the deadly status quo that can't be saved. The nice thing about bankruptcy is, it clears impossible debts and allows a restart. But it pays to pay back everyone, somehow. There is a method of going broke but still repaying that we don't want to try because this means killing the present totally unbalanced global trade and of course, stopping the US imperial projects dead in their tracks. The world is using us and we are the fools who let this happen. So time to discuss this latest futile bail-out from the perspective of History rather than Wishery [our wishes for reality].

Breakthrough Reached in Negotiations on Bailout

Among the last sticking points was an unexpected and bitter fight over how to pay for any losses that taxpayers may experience after distressed debt has been purchased and resold.

Democrats had pushed for a fee on securities transactions, essentially a tax on financial firms, saying it was fitting that they contribute to the cost.

In the end, lawmakers and the administration opted to leave the decision to the next president, who must present a proposal to Congress to pay for any losses.

Officials said they had also agreed to include a proposal by House Republicans that gives the Treasury secretary an additional option of issuing government insurance for troubled financial instruments as a way of reducing the amount of taxpayer money spent up front on the rescue effort.

The Treasury would be required to create the insurance program, officials said, but not necessarily to use it. Mr. Paulson had expressed little interest in that plan, and initial cost projections suggested it would be enormously expensive. But final details were not immediately available.

I wish I was in on those negotiations. The GOP didn't withdraw support due to being against pouring billions into Wall Street. They were against it because the Democrats didn't want to add even more tax cuts to Paulson's Ring of Power proposal. I saw this plain as day at the hearings. All of the GOP Congressmen came into the chambers and about ten of them testified. Each one wanted capital gains tax cuts. Then all but 5 of them left the chambers when Paulson and Beranke went it. I wrote in my notes, 'The GOP wants ONLY the tax cut, they don't care about the rest. It is a game.'

This game is clear: they want to pass off to the Democrats, the dirty job of supporting super-rich bankers or all those poor, little people will die out there in Americaland. The US public is very much against bailing out the super rich. The anger about all this will be directed towards the Democrats now even though the Democrats shot down the biggest Xmas gift ever for the rich, that 0% capital gains tax deal.

This blatant gift giving to the wealthy was totally ignored by the media. This is why I am very, very grateful so many readers gave me the money to not only go down to DC but to have a fine camera which I could use to record reality through my own lens. This is why, when we are forced to look at the world through the media filter, we get a dim picture. I saw many reporters there and they were utterly bored during the first half of the hearings because it was Congressmen arguing with each other. They just wanted an official tidbit from the Sphinx and his jinxed sidekick, Gollum.

There is no rescue plan, by the way, that will save and uphold equity values set during the previous bubble. There are ONLY two choices: the goddess of Inflation gets to eat everything or the goddess of Depression dines. There is no third option! That is it.

We dearly love the concept of having 'choices'. Well, during the primaries, we were given the choice of voting for either Ron Paul or Kucinich. Both were fine with me. But the US public was shoved relentlessly away from those good choices and towards no choices. Even if McCain and Obama did have other ideas about stuff, in the end, they had to toe the AIPAC line [toeing a line is the proper term, this means lining up so the toes touch a line in the sand...it is not about towing something like a trailer!] as well as please the biggest donors who of course, are the very rich.

Let's look back exactly one year ago:

Culture of Life News 9/28/2007: Speculative Bubbles Grow Outside US

Japan's export economy surges ever higher while the depression inside Fortress Japan gets even worse. The UAW have surrendered to the new reality that our children will increasingly be driven downwards as wages and benefits for them are dropped while preserving the goodies of the Baby Boomer workers. FOREX markets surge 71% in less than 3 years as the world's greatest speculative bubble grows ever faster. And interest rate manipulations by the world's biggest central banks are making this worse and worse. This is directly connected to the sudden ballooning of the FOREX reserves held by foreign powers over the last 10 years. Overseas, many writers are speculating that Saudi Arabia is now betting against the US in these markets. This bubble will burst due to the US declaring bankruptcy due to the collapse of the dollar.

When I wrote this, the previous 6 weeks of frantic rescues of the investment/equity systems of the G7 nations had succeeded wildly. Stock markets across the planet hit record highs. Everyone was high-fiving each other and jumping for glee. I was furious and said that the sudden shooting upwards of all stock markets was not due to economic health but rather, a flood of funny money from all the flying magical piggy banks which fed so much into the system that was totally engorged with debt.

It wasn't just that there was more wealth floating around, this was more DEBT. And everyone was screaming about how we needed more 'money' and more 'liquidity' which is fancy talk for 'more debt'. The world was being crushed by debts and to fix this, the central banks poured even more debts on top of this mess. This was so the US and UK could import record amounts of goodies for Xmas celebrations and so the world could consume more oil, faster. No new wealth was created. The indebted nations were given more debts. The thinking back then was, if the interest rates for these debts were to drop, it wouldn't matter!

So rates for the US and UK began to plunge. This couldn't happen in Japan since they perfected the 0% interest rate business long ago and are still sticking to it. The news about raging inflation is no secret in Japan. It seems, the US and UK media ignores this horrible news because secretly, we need and want 0% Japanese lending to continue forever, too.

When smalltown USA turned on 'Fraud Street'

Already, the Treasury and the Federal Reserve are busily drawing up plans to tighten the rules on the level of assets banks must hold to secure their loans; and to ensure that financial regulators from different countries keep in closer contact. French President Nicolas Sarkozy has called for a global summit in November to rebuild the whole world financial and monetary system from scratch, saying: 'The idea that markets are always right was a mad idea.'

Even if the Paulson plan is clinched without further delay, there is no hope of an imminent recovery either in the US or the UK. The pain for ordinary homeowners on Main Street USA is already being felt, and in Britain unemployment is rising quickly, and consumers are tightening their belts. Rosebys, the home furnishing chain, became the latest casualty in the retail sector on Friday, when it collapsed into administration, leaving its 2,000 staff uncertain about their future.

'Folks, it's not just finance,' Citigroup economist Steven Wieting warned the world. 'The recession bus left the station earlier this year.'

A fairly realistic appraisal from an English reporter for the Guardian. Always, governments tighten rules at the wrong time. When a bubble begins, they should tighten rules. Instead, they always, always, always feed bubbles. Greenspan claimed that the Fed should take the punch bowl away when the party gets going. Except he poured vodka into the bowl and then threw a flaming torch into it.

We went into a mild recession after the foolish Dot Com bubble broke. This would have cleared out a lot of junk. Instead, we decided to turn our entire economy into junk. For on the eve of the housing bubble, before Greenspan dropped interest rates to 1%, for the first time in 30 years, the government was in the green, not in the red! WOW.

This was greeted by the Supreme Court and the media as a great disaster. Mr. Tax Cutter Supreme was installed in the White House via judicial coup. He instantly began to cut taxes and the second, much more fatal bubble began to form as the Fed and the President conspired to create a gargantuan mountain of debt. I have pointed out in the past, when the interest rate is below the rate of inflation, absolutely everyone wants to get this money so everyone and everything runs in the red and goes deep into debt. This Santa Claus goodies situation is irresistible. This continues until the value of everything sopping up this free borrowing is so overvalued, no one can afford to buy them even at 0% interest.

This is all so sad. The bill passed by Congress and the GOP President is a last-ditch attempt at supporting unsupportable equity values. The hope is, this will cause raging inflation and the price/value reset that is going on will stop and we will have the power to force higher wages so both line up again. Woe to everyone, if the wage part fails! If wages don't go up, this will certainly increase the misery of the public. And since the US has killed labor unions, the chances of this working is around 0%. Wages will lag. Commodity prices will soar just like they did last year when billions were suddenly poured into the systems. And nothing will be fixed at all except we will all be in even more misery.

The proof of this is very simple: last Fall, the Congress and government began working on a bill that would 'Put money into people's pockets, fast,' in order to 'restart' the economy. It took several months to engineer this Xmas gift. I got my check the same week world energy prices hit their peak and food inflation was raging.

Afterwards, I figured out how much more I spent on food and fuel this last year compared to the year before and it came out to over $600. So my net gain was $0. This was true of all Americans. This inflationary rescue scheme merely fed inflation. Some foolish Americans spent this on goodies but this simply made their situation worse when inflation really took off after everyone got their checks in the mail.

Huge new prime number discovered

Mathematicians in California could be in line for a $100,000 prize (£54,000) for finding a new prime number which has 13 million digits.

Thousands of people around the world linked the powers of their personal computers in the search for a higher "Mersenne" prime number - named after 17th-Century French mathematician Marin Mersenne.

Mersenne primes are expressed as two to the power of P, minus one - with P being itself a prime number.
Edson Smith, the leader of the winning UCLA team, told the Associated Press news agency: "We're delighted. Now we're looking for the next one, despite the odds."

This neat news story clearly shows us how magical numbers are. The goddess of Inflation is laughing. She is capable of running a paper fiat currency far beyond 13 million digits. Using the hyper-magical concept of 'zero'. Buried within this infinity of zeros added to the number one are unique numbers like the one these professors calculated via their computer banks. The goddess of Inflation has infinite computers that run all the time. She can outrun us when she wishes. Her son, Derivatives Beast sailed from $1 billion 30 years ago to a quadzillion dollars, most of it in the last four years. And it would have grown to infinity except the bankers ceased feeding this creature three weeks ago.

This is the cause of the present stage of the panic, by the way. The $700 billion is NOT so we feed Main Street as the corrupt politicians are bellowing. Nor even Wall Street.

THIS MONEY IS FOR SAVING THE FEDERAL RESERVE ITSELF. This is why Bernanke is now hiding under his bed. By the way, the Watchers from the Outer Darkness that are the pets of the goddesses in the Cave of Death and Wealth live under beds. This is why children are scared of what comes out of bed at night. Since I was hit by a lightning bolt while in bed when I was a child, I couldn't ignore them by hiding under a blanket. They were there and I was stuck with them, there.

Everybody Calm Down. A Government Hand In the Economy Is as Old as the Republic.

By Robert J. Shiller

So the current crisis got me thinking back to 1990, the year before the collapse of the Soviet Union, when I worked with two Soviet economists, Maxim Boycko and Vladimir Korobov, to try to understand the different belief systems in their country and mine. We carried out identical surveys in Moscow and New York, comparing answers about fundamental notions of capitalism, and published our results in the American Economic Review. We expected to find that the Muscovites possessed scant understanding of how capitalism really works. But we found that they actually understood free-market dynamics better than the New Yorkers. We concluded that the Muscovites had proved more savvy precisely because their system was in crisis -- something that encouraged them to rethink their most fundamental notions.

Mr. Schiller can't understand communism because he would lose his job if he did. I have interacted not only with the Chinese communists very, very heavily but also with Russian communists. My dad's CIA work attracted both Chinese and Russians to our family because spies spy on spies. I learned very swiftly, they all understand capitalism! This is very simple: they have to study Marx! DUH.

On top of that, since they lived in a command police state, the ONLY way one can get things is to practice RAW capitalism! So they knew how to finagle things, how to plan ahead, how to NOT trust money but how to MAKE money appear the same way bankers do it in the West: how to lend to each other and how to enforce debts [make great pain!] and so forth. They live in a world of survival of the fittest. The West is corrupt and survives on 'Can I bribe someone to help me cheat the system?'

The more Russia and China apes our capitalism, the less capitalist the mind set of the people becomes.

Schiller:

2. To limit risks to the system, build better derivatives. Some of today's derivatives -- the complex bundles of toxic real estate loans that helped drag Lehman Brothers down -- turned out to be "financial weapons of mass destruction," as the legendary investor Warren E. Buffett warned back in 2003. The problem isn't derivatives per se but a certain kind -- derivatives that spun a massive web of over-the-counter contracts, relying on the solvency of countless banks and other institutions, and ultimately endangered the entire financial system when they fell apart.

HAHAHA. He wants to shrink the Derivatives Beast down? HAHAHA. Alas, the very concept of derivatives is a door directly in to the chambers of the goddess of Inflation within the Cave of Wealth and Death. Everyone would dearly love to keep this going. The problem always is, when using this window, they see the piles of infinite wealth that surrounds Her. Her bed is built of gold and the mattress is stuffed with paper currency. She heats her chambers with burning counterfeit money or money from dead countries that no longer exist or whose governments fell.

But the desire to play with derivatives that can go up to infinity, fast, is irresistible. We are talking about gnomes here! They find the goddess of Inflation to be the sexiest female, like, totally. They open the derivatives window to reach in and grab some wealth and end up crawling inside Her chambers to have sex.

Mortgage help for bankrupt homeowners dropped

House Democrats say the idea of letting judges rewrite mortgages to help bankrupt homeowners avoid foreclosure won't be a part of the $700 billion financial industry bailout. Speaker Nancy Pelosi, D-Calif., told Democrats at a closed-door meeting Friday evening the provision would be a deal-breaker for Republicans who she has said must deliver substantial votes for the rescue plan. That's according to several lawmakers who attended the session.

Democratic presidential nominee Barack Obama had said earlier that the measure didn't belong in the bailout.

The GOP and DNC will now fence in public over who is the creepiest of them all. We get to choose between corrupt Republicans and corrupt Democrats. I would wish to ask the non-corrupt members of Congress to start a new, bipartisan party, the 'No Bribery Party.' I would happily support it. But the media needs the revenues of TV and paper ads to make wealth. They would crush any anti-bribery people. This is the main reason the media refused to put Ron Paul and Kucinich on the air or interview them, etc, during the primaries.

Bailing out underwater homeowners who played risky games by sucking up too much debt is tricky. Obama is right: we can't bail them out via this bill. When the courts are given the right to rewrite contracts, this undermines our entire legal system. Just as the Supreme Court undermined our elections when they said there as no reason to count votes since we have no right to vote for President, if we let judges simply redo all contracts, this sets massive precedence for doing this ALL the time!

Everyone will sign contracts and then sue! Our courts will collapse under the tsunami of contract re-writes done by judges who have little idea of what is really going on! People have to learn how to not sign stupid contracts. Laws can be passed forbidding certain types of contracts. But since most of Congress has been bribed by bankers, there are few protections left. This is why we had the housing bubble! The contracts that people signed should have been made illegal BEFORE this.

Undoing this is Congress's job and they, not the courts, must do this by forbidding gnomes from cheating, defrauding and defaming their customers! This takes me to the most important part of this story: corruption in Congress and the Presidency.

Open Secrets: Money and Votes Aligned in Congress's Last Debate Over Bank Regulation

Sixty-six years later, in 1999, the financial services industry succeeded in essentially shattering Glass-Steagall, after putting a number of cracks in the law over the intervening years.

(As with the 1933 act, those in the know often use the names of the Financial Services Modernization Act's chief sponsors when referring to it: Gramm-Leach-Bliley. Former Texas senator Phil Gramm is now vice chairman of Wall Street firm UBS and advised John McCain's presidential campaign. Jim Leach, a Republican congressman from Iowa, is retired from Congress and supports Barack Obama for president. Tom Bliley, a Republican congressman from Virginia who chaired the House commerce committee, is now a Washington lobbyist, representing clients including the Commercial Mortgage Securities Association.)

The congressional vote on Gramm-Leach-Bliley in November 1999 was not close. The bill passed handily with bipartisan support in both the House of Representatives and Senate, 450-64 between the two chambers. President Bill Clinton supported the legislation and readily signed it. There were some strong arguments for the bill, chiefly that American banks were too constrained to compete with German and Japanese banks. There was also criticism that the legislation was pushed through too quickly and that it didn't modernize the marketplace's regulatory system. Pressing most aggressively for Gramm-Leach-Bliley was Citigroup, which had merged its bank with Travelers insurance company, and needed a change in federal law to keep the giant corporation together.

The finance, insurance and real estate sector contributed more than $86 million to members of Congress between 1997 and the key vote on Gramm-Leach-Bliley in November 1999. As the graph below shows, on average, those lawmakers voting "yea" received about $180,000 in campaign contributions from individuals and PACs in the financial sector during that period. Those who voted "nay" received about $90,000 each, or half of what supporters got.

McCain

The very few GOP votes against this bill which is the one that opened the doors wide to the Goddess of Inflation's chambers and which is at the bottom of the present banking collapse: the GOP votes against were people who ditched their sponsors. They were either punished by the bribers or the bribers knew these guys faced serious opposition and thus, needed cover. They knew the bill would pass so they pretended to be clean and voting their conscience. If the vote was too close, they would have voted 'yea.'

Now, today we have the Democrats in charge. So let's look at where these people raise money:

Clinton

Obama

Obama

And now for clean Americans who don't take any bank bribes:

Kucinich

Ron Paul

Progress in Talks Creates Optimistic Mood; A Phone Call to Warren Buffett

The mood was said to be "optimistic" entering the evening talks, according to a Senate aide familiar with the talks, after policymakers -- including Treasury Secretary Henry Paulson -- made progress during an afternoon negotiating session. Staff predicted a long night of negotiations, however, an observation backed up by the delivery of food from sandwich shop Cosi to Ms. Pelosi's office just before 8 p.m. EDT.

Congressional negotiators have been consulting with outside experts including billionaire investor Warren Buffett amid a focus on market reaction to the plan.

"We've had Warren Buffett on the phone tonight, other experts that we've been consulting," Sen. Kent Conrad (D., N.D.) told reporters as he walked through the U.S. Capitol. He declined to identify other people with whom lawmakers have consulted.

GAH! No one called ME. And it isn't because I am a nobody, either. No, they called the richest people in America for advice! In between smooching with the Goddess of Inflation, these gnomes give orders. HAHAHA. Buffett will instruct them how to do things! Heaven forbid, they talk to Kucinich or Ron Paul or you and me.

Greenspan speaks out:

The U.S. economy is in the grip of the most severe financial crisis since the Great Depression. Even highly credit-worthy businesses are paying unprecedented premiums for borrowing. A large fraction of businesses are shut out of the credit market altogether. Past experience with financial crises shows that overall economic activity contracts soon after the crisis unless swift corrective action alleviates the crisis. Unemployment rises, employment falls, the nation’s production of goods and services declines, and consumers’ purchasing power diminishes. At worst, as in the Depression, the economy collapses.

Economists often disagree about the causes of financial crises, including the present one, though many believe that declining housing prices and mortgage practices that amplify the effects of those price declines are central factors today. But there is near-universal agreement that the federal government must take aggressive steps to protect workers and businesses from the harmful effects of a financial crisis. The great majority of those deserving this protection had no role in causing the crisis.

We are deeply concerned about instituting reforms for the longer run that will prevent similar crises in the future. We applaud the increases in capital requirements for the institutions that have elected to become subject to the Federal Reserve’s capital requirements.

Arrest this criminal. Gads. What a mooch. He not only refuses to take responsibility for creating this housing bubble, he focuses only on the end effects and NOT the cause. And yes, economic professors dispute causes. But he is supposed to not only be a genius but he was the TOOL, the guy who ran things! So he better know the damn cause of all this and since I know he shaves more often than Bernanke, he has a mirror.

Credit crunch banker leaps to his death in front of express train

The City was in shock last night after the apparent suicide of a millionaire financier haunted by the pressures of dealing with the credit crunch.

Kirk Stephenson, who was married with an eight-year-old son, died in the path of a 100mph express train at Taplow railway station, Berkshire.

Mr Stephenson is believed to have taken his own life after succumbing to mounting personal pressures as the world’s financial markets went into meltdown.
*snip*
At Olivant Advisers he was paid £333,000 last year, but is thought to have made millions more from the core Olivant business, based in Guernsey.

I got that story last night as well as some of the readers here who sent me or linked this story in the comments section. Yes, the suicides are beginning. Recently, in England, a multimillionaire who was ruined shot his children, his wife and his horses before burning down his mansion and shooting himself in a Götterdämmerung moment.

At least my own ancestor, in the crash of the 1890's only shot himself and his wife and not my grandmother.

The business of this latest economic suicide was in Guernsey. He was a stupid pirate. He was a hell hound. He gets zero sympathy from me. His wealth was due to hiding from taxes and cheating his neighbors.

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The Sphinx is Scared

September 27, 2008

Elaine Meinel Supkis

Dear readers, you all sent me the money needed to take the train to Washington, DC. There, I not only got great photos and met lots of people some of whom knew me in NYC as 'the Housewife From Hell' as the Daily News dubbed me long, long ago. I got very lucky and got to sit within arm's reach of Bernanke and Paulson. I used this occasion to 'touch' them both in the singular way I operate. A sign that this succeeded was the fact that a sudden, rather violent storm came roaring ashore and not only hit DC, but followed me home like a dog. So today, I am very happy to learn that Bernanke's sleep has been as disturbed as Paulson's sleep. Now, he is LEAVING THE FRAY and going into hiding! HAHAHA.

Bernanke Jumps Out of Political Fray After Warning of Collapse

(Bloomberg) -- Ben S. Bernanke jumped into the political fray this week when he urged quick action from Congress to deal with ``grave threats'' to the financial system. Now he's trying to jump back out.

The Federal Reserve chairman hasn't returned to Capitol Hill after two days of congressional testimony earlier this week. He has made it clear to Treasury officials and lawmakers that he isn't taking part in negotiating details of a $700 billion proposal to rescue the financial system even as the plan runs into a political buzzsaw.

By letting Treasury Secretary Henry Paulson be the point man with Congress, Bernanke may be trying to restore the Fed's position as a neutral party in Washington and preserve the central bank's independence. That's after he put both on the line by endorsing Paulson's plan and using the Fed's balance sheet to rescue creditors of Bear Stearns Cos. and American International Group Inc.

There is some great utility in getting physically close to someone one wishes to 'reach'. Since Bernanke won't talk to me or even want to know if I exist, I had to kind of impose on him. The first step is to draw him into the realm of mythological magical beings. When he confidently strode into the Chambers, he sat down right in front of me and then laced his fingers in front of his chest and impassively. He stared straight ahead without flinching, itching or moving a muscle.

I was not allowed to take a photo of him at this point in time so I took out my pad and began to scribble rapidly. As this was going on, I said out loud, 'Sphinx.' He flinched. This was the only movement he made. He heard me quite clearly, incidentally. For everyone around me heard this, too. Those of us who were in the back of the Chambers were forbidden to say anything. It seems one of the fine, young people in the back row were sufficiently riled and forwards that one of them held up a small sign which has now made the rounds of the internet.

Good for them! I think that Bernanke has finally figured out that he is NOT a very popular figure. He also is aware that some of us are eyeing him very closely in the Other Realm. This is the place where the Magic Flying Piggy Bank lives. Instead of people bowing and scraping for him, he is now somewhat aware that many of us look at him with some fury.

The United States has a Vice President who is always in an undisclosed place and who never, ever has press conferences or answers questions or appears in the Senate for questioning. We have a President who can't go out in the public for the last 6 years. Who holds press conferences about once a decade and who never answers questions at all. But rules unilaterally and even overrides Congressional bills he signs! Then there is the Jewish dual-citizen traitor these two shy rulers hired to be in charge of US security. Chertoff nearly never appears in the news or answers questions or even talks to us from his undisclosed bomb shelter.

McCain dearly wanted to run for President in this fashion. Palin, after flashing her glasses at us and scaring everyone, has now gone into hiding and wants to run with no debates, no press conferences.

I bet that poor Gollum, the creature who can't sleep at night and is tormented as he scratches for the Ring of Power and then, when slapped down, whimpers and whines. I read that the negotiations to save Gollum Sachs and JP Pirate has gone until 3am at night. Night is the hours when the Watchers are the most powerful. Awake or asleep, they can come flitting into minds. They carry a bag full of disturbing visions. They can transform reality with a snap of their clawed fingers.

It appears that no one who is supposed to be leading us is even putting up the facade of leadership. They are all going off to play golf. This sad business has leeched into the election. The United States is a very big nation with millions of people. Yet no one dares lead us for they will be removed for various tiny flaws. Yet the leaders who are at the top have grave flaws! This is a serious problem which is due to our media that is the gatekeeper to power. They pick and choose which things to focus on and inevitably, refuse to focus on anything meaningful. Then they gleefully accuse the public of being frivolous.

This banking collapse is not frivolous! It is very serious. There are many people who would like to insist, there is no crisis so why save the banks? Then there are the army of the rich who want the banks saved, who want their money to earn value and to gain that value and who are terrified that they will not gain great wealth. So they want a bail out that is essentially turning the US government into a mega-bank that gets to hold all debts generated for fees by the rest of the banking system!

We need to fix the banking system, of course. It needs desperately to return to its ancient virtues. The greed-is-good gang have used the powers of the banking system to grind out infinite loans so they could collect their 6% bonuses. They would happily do this forever. But the upper limit of debt has been reached. In trying to surpass this natural limit, they created many new lending schemes which had even better returns. And on and on this system grew as out of control bankers cooked up a stunning number of strange, warped 'instruments' which would allow them to ignore natural limits.

In Congress, our corrupt politicians have decided to plow everything possible into the latest spending bill which is a veritable Santa Claus sack of goodies.

Senate sends big spending bill to Bush to sign

(AP) — Automakers gained $25 billion in taxpayer-subsidized loans and oil companies won elimination of a long-standing ban on drilling off the Atlantic and Pacific coasts as the Senate passed a sprawling spending bill Saturday.

The 78-12 vote sent the $634 billion measure to President Bush, who was expected to sign it even though it spends more money and contains more pet projects than he would have liked.

The measure is needed to keep the government operating beyond the current budget year, which ends Tuesday. As a result, the legislation is one of the few bills this election year that simply must pass. Bush's signature would mean Congress could avoid a lame-duck session after the Nov. 4 election.

The Pentagon is in line for a record budget. In addition to $70 billion approved this summer for operations in Iraq and Afghanistan, the Defense Department would receive $488 billion, a 6 percent increase. The spending bill also offers aid to victims of flooding in the Midwest and recent hurricanes across the Gulf Coast.
Such a huge bill usually would dominate the end-of-session agenda on Capitol Hill. But it went below the radar screen because attention focused on the congressional bailout of Wall Street.

Absolutely everything was handed out, wasn't it? Is the US income growing by 6% a year? Is our GNP growing by 6% a year? Is tax revenues growing at all? NO! Instead of balancing the books, Congress increased spending significantly. If something grows 6% a year, it rapidly begins to double and redouble, faster and faster. This is an unacceptable level of inflation! And the interest rate is at 2%. And Bernanke will be asked to drop it to 1%. This is painfully obvious. Everyone hopes to have spending grow by 6% based on 1% interest loans. Even if this is done, since both the loans and the spending are in the red, this means US national obligations for the future will double every 7 years. It went from $5 trillion to over $10 trillion in this fashion already. This means, by 2014, it will be over $20 trillion. This is an impossible debt level.

Of course, the US budget is NOT growing by a mere 6% a year now. This time around, it is growing at 10%+ a year! If we do this for only 5 years, it will be over $20 trillion by 2013. Homeland Security, run by the Invisible Dual Israeli Citizen, was raised to $40 billion. The wars were raised to $70 billion. and the other parts are now at $488 billion and we haven't the slightest idea what the spooks at the CIA and other Black Ops are getting. I would suggest, at least $75 billion. This ads up to almost $700 billion. Which is a MAGIC NUMBER!!!! HAHAHA.

It is the bank rescue amount. I suspect this was chosen because it was a number haunting these criminal minds. They all know they are very naughty to run this level of debt to pay for their funky military/industrial complex. Americans who are angry about the $700 billion TARP bank bail bill are NOT angry about this untidy mess. Indeed, anyone suggesting we cut back on our paramilitary spending is viewed as some sort of traitor so no one dares cut a penny!

By the way, the imposition of a US standing army in the US itself for 'crowd control' is all part of the Sovietization of the US. This is all very sad and stupid but the US has accepted a high level of East German-style limitations on travel and public places, the push to completely control our nation via privatized military is rushing forwards.

US Corporate SPECULATIVE Debt Default Rate Could Top 23% by 2010

If realized, this estimate suggests that 353 speculative-grade rated nonfinancial firms could default between 2008 and 2010, with potentially more than 200 of these defaults materializing in the second half of 2009 and in 2010.

Consumer-sensitive sectors — such as consumer products, media and entertainment, and retail and restaurants — will be among the worst hit, in line with what happened in 1990-1992.

This is very much like 1929 headlines. All the speculators will be ruthlessly ground down by natural forces. Nothing can run in the red forever. Nor can money be made forever speculating without risk. The very speculations that seemed risk-free accumulate risk over time due to simple growth itself. Nothing grows forever. NOTHING. Except the Universe itself. And maybe, not even that.

Financial crisis: Bradford & Bingley to become latest victim

B&B, the eighth largest mortgage lender, is the latest banking institution to become a victim of the financial crisis and the deteriorating state of the housing market.

Its shares fell six per cent to an all-time low of 20p as it became clear that no rival bank was prepared to mount a rescue bid. Since the start of the year, B&B shares have fallen 90 per cent.
However, the British Banking Association reassured the 2.5 million customers who have £22 billion deposited with B&B. "Customers have no need to worry about any deposits in any British bank.

In the Great Depression, even Bernanke probably knows that the banks didn't all go belly up on October 17th. They all didn't die by October 17, 1930. They crashed down, one by one, day after day, week after week, month after month. Until Roosevelt became President and shut the entire thing down to save the survivors from the inevitable. To master this mess, he arbitrarily doubled the value of gold versus paper gold certificates and then confiscated all the private gold holdings. Via fiat. The US government was fiscally sound when he did this. Not going into bankruptcy like today.

Gretchen Morgenstern, the best economics reporter for the NYT:

Two weeks ago, the nation’s most powerful regulators and bankers huddled in the Lower Manhattan fortress that is the Federal Reserve Bank of New York, desperately trying to stave off disaster. As the group, led by Treasury Secretary Henry M. Paulson Jr., pondered the collapse of one of America’s oldest investment banks, Lehman Brothers, a more dangerous threat emerged: American International Group, the world’s largest insurer, was teetering. A.I.G. needed billions of dollars to right itself and had suddenly begged for help.

The only Wall Street chief executive participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulson’s former firm. Mr. Blankfein had particular reason for concern. Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said.
*snip*
In the case of A.I.G., the virus exploded from a freewheeling little 377-person unit in London, and flourished in a climate of opulent pay, lax oversight and blind faith in financial risk models. It nearly decimated one of the world’s most admired companies, a seemingly sturdy insurer with a trillion-dollar balance sheet, 116,000 employees and operations in 130 countries. “It is beyond shocking that this small operation could blow up the holding company,” said Robert Arvanitis, chief executive of Risk Finance Advisors in Westport, Conn. “They found a quick way to make a fast buck on derivatives based on A.I.G.’s solid credit rating and strong balance sheet. But it all got out of control.”

I figured it was less than three traders would show up. It was only the Goldman Sachs and one forlorn chap from AIG. Goldman Sachs should be thoroughly investigated by Congress. Before doing this, all Congressmen who have gotten bribes from Goldman Sachs should be recused from this investigation. Then Kucinich and Ron Paul can tear into this business. Make them co-chairs. I will take notes in the audience. Heh. As I stated in the past here, Goldman Sach's lies about having virtually no losses due to their very clever trading rang hollow to my ears. Instead, they were very exposed which is why Paulson had quite a fire in his pants.

I noted at the hearings this week, Paulson's suit was rumpled. His blood vessels stood out on his hands making them look like the hands of a 100 year old Duchess. His little finger was crooked with tension. He had lost weight, too. A picture of a man in torment. I expect him to finish this all very badly. Very badly.

AIG had a trillion dollar balance sheet. But was exposed to the Derivatives Beast to the tune of over $50 trillion? Who knows. With the fall of Lehman Brothers, all the swaps and OTC deals were finally triggered en mass. And there was no way of stopping this massive cascade of derivative triggering rescues that were never anticipated by the juvenile delinquents hired to monitor and control these deals. Cleaning up the Derivatives Beast's messes will consume all things of value if we try to save these blasted, stupid banks and their infantile geniuses who created this mess in the first place.

Confidence ebbs as money markets freeze

Key parts of the financial system broke down this week as doubts about counterparty risks of the world’s biggests banks saw lending seize up.

Money markets froze as financial institutions refused to lend to each other because of fears of further bank failures.
*snip*
The heightened nervousness sparked bets that the Federal Reserve might opt for an emergency rate cut or slash key rates by half a percentage point from the current 2 per cent, while one of main measures of credit risk rose to fresh highs.

The spread between three-month dollar London interbank rates and average overnight rates jumped for the fourth day in a row to 206 basis points.

The TED spread, which compares three-month Treasury yields and three month dollar Libor, also remained over 300bp, around all-time highs, underlining investors’ caution as they switched into the safety of short-term government paper.
*snip*
The repurchase markets, where banks lend cash in exchange for collateral such as government bonds, have also ground to a halt. This week, banks admitted they were only prepared to lend out cash for the highest quality collateral such as German bunds. Some traders said that UK gilts were even being refused by some counterparties because of the heightened state of alarm over the financial system.

So everyone wants German bunds and don't want UK gilts? The US/UK WWII team has been falling off the same cliff here. This is a significant part of the G7. Both the US and Britain have neglected to attend to their trade deficits. For some bizarre reason, these growing deficits, like the budget deficits, have simply been allowed to balloon to whatever size they wish. So they double and double every decade.

The simple tools of classic banking have been cast aside along with the simple tools of trade restrictions which prevents messes. The food scandals pouring out of China due to China's primitive food manufacturing rules shows clearly that there are good reasons to restrict trade. One is, protecting consumers from poor products. But merely to keep out excessive trade, this is another very good reason to use tariffs and barriers. They are tools and not evil in themselves. The religion of 'free trade' is foisted upon the US and other nations in order to EXPLOIT people and resources, NOT PROTECT THEM.

Bank steps in to offer £40bn loans

The worsening financial crisis forced the Bank of England into an unprecedented intervention today as it offered at least £40bn to cash-strapped banks.

Lenders are hiking mortgage costs because of a sudden surge in the rate at which banks lend to each other for three months, as those hit by the credit crunch hoard funds.

The Bank usually offers three-month money on a monthly basis, but will hold auctions every week from Monday for the first time while the pressures in wholesale markets remain.

The central bank has not revealed the sums involved in future auctions but they are likely to be of a similar size to Monday's if desperate banks snap up the funds. The move comes as interbank three-month lending rates soared to 6.28 per cent yesterday - way above the Bank's official 5 per cent base rate.

Ever since exactly a year ago, the central banks of the G7 nations have had to intervene very heavily in order to keep the banking system going. Each time, in the past, they said this was all very temporary. And the Fed said, lending from the TLAF window was a test, a game, not serious. Everyone was doing it to enjoy the sensation of borrowing money and pretending to be bankrupt. Now that they are all going bankrupt despite these lies, we should toss out the business of 'this is temporary.'

Until significant sectors of the US and UK normalize and cease running in the red, our banking systems will be undercapitalized. Dropping interest rates simply decreases capital. Since savings are considered DEFICITS, no banks want this until this year. This is why governments can't allow investment bankers to have a 30-1 or an 80-1 lending/savings ratio like we saw last year. Banks want a 1,000-1 ratio. Or better still, infinity to 1 ratio. This would destroy any currency very fast. This is why the neglect of reserve ratios was most disturbing and isn't ending, it is continuing.

Now, here is an article I wrote a year ago, about Japan. The riddle of Japan's contribution to the collapse of the US manufacturing and banking systems must be solved if we wish to survive as a nation.

From one year ago at Culture of Life News: Japan's Export Markets Boomed As World Banking Collapsed

Japan's trade surplus profits rose 400% this last year. US auto workers cease their strike and lose pay and benefits as the depression being imposed on the working class relentlessly forces them back down the economic ladder and back into poverty and servitude. The British banking system is very weak yet the Queen is still allowed to run tax haven pirate coves that weaken England. Hahaha. And Carlyle, even as it hides under Her skirts, lost a lot of money in July. I examine all this and tie the lose ends together yet again. Oh, and the bears are supposed to be routed due to a rising stock market. How 1929 of them to say this!

Japan and Germany both had the greatest trade profit surpluses last year. This means both nations are the top trade powers on earth. Yet, when I was in Congress, everyone there at the hearings talked about Japan as if it is weak and not tremendously powerful. No one mentioned Japan's massive FOREX reserves. Certainly, the Sphinx didn't mention this. Considering that the Federal Reserve has no reserves now and is swapping the gold reserves...an important topic for Kucinich and Ron Paul to discuss once they eliminate all the guys on the Finance and Banking committees who take bribes from Wall Street.

The Nikkei this week:

Stocks: Nikkei Slides On Skepticism Over U.S. Bailout Plan

TOKYO (Kyodo)--Tokyo stocks fell Friday, with the key Nikkei index closing below the 12,000 level for the first time in a week, as investors grew skeptical about whether the U.S. government and Congress could soon reach an accord on the government's financial bailout plan.
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Nomura Chief Sees Big Boost From Lehman Deal

TOKYO (Nikkei)--Kenichi Watanabe expects a big strategic benefit from the acquisition of Lehman Brothers' core businesses in Europe, the Middle East and Asia.
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Core CPI Jumps 2.4% In Aug, Up For 11th Month

TOKYO (Nikkei)--The nationwide consumer price index rose 2.4% in August from a year earlier, matching the previous month's rise, which was the sharpest increase since October 1997.
************************************

C's Create Files For Bankruptcy Protection, Debt Y11.4bn

TOKYO (Dow Jones)--C's Create Co. (8921) said Friday that it has filed for bankruptcy protection with the Tokyo District court with debt totaling Y11.4 billion.
**************************************

Forex: Dollar Falls To Lower Y105 On Uncertainty Over U.S. Bailout Plan

TOKYO (Kyodo)--The U.S. dollar fell to the lower 105 yen level Friday in Tokyo amid growing doubts over whether the U.S. Congress will pass by the end of the week the government's financial bailout plan to stabilize the U.S. banking system.
**************************************

WSJ: WaMu Fails, Is Sold Off to J.P. Morgan

Federal regulators seized Washington Mutual and struck a deal to sell the bulk of its operations to J.P. Morgan in what is by far the largest bank failure in U.S. history.

Japan hasn't had depression in years. It has had inflation. Now, the inflation is moving along smartly. No recognition from the Bank of Japan of this reality. Also, the news that the yen is getting strong instead of dropping to 120 to the dollar which the exporters want, this is constant news in Japan. The US dollar gets weak, the Nikkei drops like a rock. This is so blatantly obvious, smart traders play this game outrageously and are getting very rich since this dynamic is so obvious.

The Japanese are also buying up the dying sectors of the US banking system! Another sign that they are not in a depression. Or outsiders would be buying up Japanese banks, not the other way around. the stock market in Japan always flounders when the dollar gets weak and US lending slows. This entire country's economic base is based on exports to the US.

U.S. will lose financial superpower status: Germany

(Reuters) - Germany blamed the United States on Thursday for spawning the global financial crisis with a blind drive for higher profits and said it would now have to accept greater market regulation and a loss of its financial superpower status.

In some of the toughest language since the crisis worsened earlier this month, German Finance Minister Peer Steinbrueck told parliament the financial turmoil would leave "deep marks" but was primarily an American problem.

"The world will never be as it was before the crisis," Steinbrueck, a deputy leader of the center-left Social Democrats, told the Bundestag lower house.

Who won WWII? Well, wars are being waged constantly. Trade wars, that is. The US banking system's failure is due to the entire US and UK trade and budget systems running too deep in the red, too long. Absolutely no one in power is even slightly interested in fixing this fundamental problem. Instead, with the bank rescue bill and the budget bill in the US, the deficit spending has greatly increased. Then, when we add onto this, the rescues: this is fatal.

Here is Denniger's video where he talks about all this:

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Understanding The End Of Glass-Steagall Act

September 27, 2008

Elaine Meinel Supkis

I spent 8 hours with no breaks, observing the US House as it tried to deal with the complete collapse of the entire US banking system. While debating the $700 Billion Bank Bail Out Bill, I was astounded at the lack of knowledge, the shallow discussions, the stone-walling, the wailing of Gollum Sachs complaining about not sleeping, but no discussion as to how Congress enabled and assisted in this collapse. So here is a comprehensive article about just ONE aspect of this historic banking disaster: the death of the Glass-Steagall Act and how it enabled the banking lending bubble.

Time to examine the bill from Congress that helped to recreate the toxic trusts of the Roaring Twenties:

The bills were introduced in the Senate by Phil Gramm (R-TX) and in the House of Representatives by James Leach (R-IA) and Thomas Bliley (R-VA). The bills were passed by a 54-44 vote largely along party lines with Republican support in the Senate and by a 343-86 vote in the House of Representatives. Nov 4, 1999: After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. Democrats agreed to support the bill only after Republicans agreed to strengthen provisions of the Community Reinvestment Act and address certain privacy concerns.

The final bipartisan bill resolving the differences was passed in the Senate and was signed into law by President Bill Clinton on November 12, 1999.

The banking industry had been seeking the repeal of Glass-Steagall since at least the 1980s. In 1987 the Congressional Research Service prepared a report which explored the case for preserving Glass-Steagall and the case against preserving the act.

Many of the largest banks, brokerages, and insurance companies desired the Act at the time. The justification was that individuals usually put more money into investments when the economy is doing well, but they put most of their money into savings accounts when the economy turns bad. With the new Act, they would be able to do both 'savings' and 'investment' at the same financial institution, which would be able to do well in both good and bad economic times.

The Gramm-Leach bill was a 100% GOP affair. Many commentators on the right would like to make this affair Bill Clinton's responsibility. The bipartisan nature of the vote for this bill definitely puts a lot of responsibility on both parties. But the initiative for the impetus behind this and the bankruptcy bill lies within the GOP. A number of Democrats desired this, too. But nearly the entire GOP desperately wanted these bills.

For example, in the Senate, only one Democrat voted for the bill. All Republicans but 2 voted for it. Only one of the two didn't vote at all, the other voted 'Present.' 79% of the House voted because of the addition of provisions that would encourage these new-fangled financial institutions to lend to inner city neighborhoods. The House alterations to this terrible bill gave the GOP a veto-proof majority.

Clinton, in turn, signed this. Interestingly, all but 3 NY Representatives supported this bill. Half of the Texas delegation voted against it. The number of Republicans against the bill, in contrast to the Senate vote that was 100% behind the Senate version, was due to anger over the inclusion of the easing of lending to inner cities. A common thread in our history is the frowns over spending money on our inner cities! More about that later.

To review this matter and look more closely at the machinery that destroyed US banking from top to bottom, we should look closely at this bill:

Gramm-Leach-Bliley Financial Services Modernization Act

TITLE I -- FACILITATING AFFILIATION AMONG BANKS, SECURITIES FIRMS, AND INSURANCE COMPANIES

Repeals the restrictions on banks affiliating with securities firms contained in sections 20 and 32 of the Glass-Steagall Act.

Creates a new "financial holding company" under section 4 of the Bank Holding Company Act.

Such holding company can engage in a statutorily provided list of financial activities, including insurance and securities underwriting and agency activities, merchant banking and insurance company portfolio investment activities. Activities that are "complementary" to financial activities also are authorized. The nonfinancial activities of firms predominantly engaged in financial activities (at least 85% financial) are grandfathered for at least 10 years, with a possibility for a five year extension.

The Federal Reserve may not permit a company to form a financial holding company if any of its insured depository institution subsidiaries are not well capitalized and well managed, or did not receive at least a satisfactory rating in their most recent CRA exam.

To join in this carnival, first the banks and investment houses had to be capitalized. Citigroup already won permission to do this before the bill passed. We know that during the following 10 years, Citigroup had to sell larger and larger pieces of its corporate self to OPEC lords and Asians in order to re-capitalize the floundering Citibank group.

Let's look at the stock charts for Citigroup after it got permission to become this new, dangerous entity:

Even as the Dot Com collapse riled markets and stocks fell and fell, Citigroup shot upwards! The magic of the creation of this new entity attracted investors a great deal especially overseas investors. In just 2 years and this, during a huge downturn in stocks, the Citigroup stocks shot upwards from $15 a share to $55 a share! This was $20 a year increase in value which meant it more than doubled in value every year.

In general, indeed the very definition of a bubble is, it more than doubles in size every year. This is called 'unsustainable growth'. All growth in any system has to level off at some point or it overwhelms natural limits. The only entity that can have eternity and infinity is the unimaginable place that surrounds our entire universe, the anti-universe which can contain infinite numbers of expanding universes. I call this place, 'The Outer Darkness' since astronomers can't see it and the Big Bang veils even the darkness itself from our eyes. We can only see inside of our own bubble.

The fact that our universe is a big bubble troubles astronomers who think this universe bubble will collapse like all other, smaller bubbles. It can't double in size forever, in other words. We don't know but usually, micro-natural forces are mirrored nearly perfectly by macro-natural forces.

After 9/11, our entire economy went on the skids. All of Wall Street was literally damaged or huge parts of it destroyed on that day. The rest was nearly unusable for weeks. The economy began to retract. Greenspan had already been cutting interest rates quickly as Bush cut taxes so the economy could run again.

And it did! ON THE WRONG TRACKS. 2003, Citibank was on the ropes. But then, the Saudis stepped in and bought a huge stake in it thanks to the flood of easy profits from soaring oil prices, post-9/11. The US government was banging the drums for a war with Iraq. The Greenspan 1% interest rates were kicking in.

Citibank suddenly was 'capitalized' by all this and the new, sub-inflationary rates were a god-send to that bank and they began writing both private and corporate loans at a tremendous pace. The stocks shot up in value to the 2000 levels of $55 a share and this peaked on the end of February, 2007. This is when the first banking collapse shocks hit world markets.

From Culture of Life News, February 27, 2007: Chinese Communists Pull Rug Out From Under USA Capitalists

From Bellepheron on Pegasus to Icarus or the son of Helios, when one rides the wild horses to the very heavens themselves, the fall is great and obvious. For several years, I have said repeatedly that a trillion dollars in FOREX funds would trigger the secret (HAHAHAHA) Chinese plan to upend the American empire via economic meltdown.

The ernest Chinese felt they should warn us so several months ago, as they approached that sum, they warned us to cut spending and start saving...ALL OF US. Not just any one person. Having warned us, now comes the inevitable storm.

Just this morning, I warned everyone about the Chinese stock market fall after the commuist leaders tightened credit and warned banks to be careful with loans.

On a side note, today the Chinese stock exchange fell a great deal because they know the American markets are about to collapse because we can't use rising home values to pay for goodies from China. The Chinese government doesn't care if billionaires lose money. They want people to put money in savings, not stocks. Stocks are gambling.

But this drop in value reflects reality: the USA is going belly-up and won't be able to buy stuff much longer as the dollar drops in value and the USA continues insane spending programs that are entirely based on generous loans from Asia. The Chinese assessment of the future is correct. Our own leader's rosy prognastigations are wrong.

And this is the real bomb that is set to go off right under our noses.

The silly American media has been lying to everyone about China: that the Chinese were foolish and stupid and didn't understand inflation or the idea of comparative value versus comparable trade or anything. They were supposed to be naive and frankly, stupid.

From the same day: Economic Cartoons Up The Yin Yang

For several years, I have struggled to make cartoons and charts that lay out in no uncertain terms, what is going on with our economy. They started out rather crude as I learned how to use the Wacom pad which is a very disassociative way of drawing, the picture shows up far from where the hand is drawing and the computer process is slightly delayed compared to the normal speed which one draws using analog tools like pencils and paper.

My third story that day: Classic Panic Attack Roiled World Markets

Xinhua News even thoughtfully explains fully what happened yesterday.

Securities analysts said the culprit behind the "Black Tuesday" panic was a rumor that China is to levy capital gains tax on retail equity investors. However, as the Ministry of Finance and the State Administration of Taxation blew out the rumor, Chinese shares regained their momentum with the recovery of investors' confidence.

HAHAHA. So, Chinese officials launched this crash and then they gently told the investors in China who read Chinese newspapers, 'Just kidding.' I must be the only person in blogland who noticed the Chinese communists are holding a big meeting this month to discuss our futures. A great time to see what control they have over our lives.

Namely, it is total. Arf.

The housing bubble popped one year before this event. It was a hyper-magic number day and like 7/17/7, is a key date in the unfolding of this collapse. When this event roiled world markets, all the central bankers but China's, began to play hysterical funny money games to keep the GROWTH momentum up. When we look back at the Citigroup charts, we see clearly how there was a very sudden, steep decline which ended quickly.

Like a cork in water, it popped back up to $55 dollars a share. But this was very temporary. By mid-July, Citibank as well as all its fellow new-fangled fellow financial investment banks were all sliding off the exact same cliff and for the exact same reasons.

We can see from the charts who selling of these toxic stocks shot through the roof. All bankrupt corporations have the exact same charts. The sudden rise in the selling graphs along with a steep reverse-hockey stick value graph above! Nearly never can a corporation survive this sort of shock. They can be bailed out by governments but this is a faux wealth event. Citibank has gone from 30 million shares in exchanges to over 300 million shares traded in less than two years. Everyone is bailing.

The close-up chart showing this week makes it very clear that last week, it nearly totally collapsed. The only support for this crummy, stupid bank was the Bank Bail Out Bill. When the Democrats were scared into rushing through the bill on Monday, these stocks shot upwards tremendously. And stayed at that level for three days. By Tuesday, I was roaming the Halls of Congress, sniffing around and spreading warnings. By Tuesday afternoon, the flood of calls from outraged American patriots killed the Paulson coup bill that would hijack US credit and hand the entire thing to the bankers with no reforms, not strings attached and no review by courts or anyone!

Citibank's stocks began to flounder again. But has risen slightly on the hopes that the Democrat's amended bill will bail them out. This is a very long article because it is vital that we understand perfectly well how Congress, the corrupt Presidents [Clinton picked up $100 million for his services, for example] have helped the banking gnomes create machines that were badly designed and had serious internal flaws that doomed them to create bubbles that would inevitably pop. Back to the document, 'The Gramm-Leach-Bliley Financial Services Modernization Act':

If any insured depository institution or insured depository institution affiliate of a financial holding company received less than a satisfactory rating in its most recent CRA exam, the appropriate Federal banking agency may not approve any additional new activities or acquisitions under the authorities granted under the Act.

Provides that bank holding companies organized as a mutual holding companies will be regulated on terms comparable to other bank holding companies. [HAHAHA]

Lifts some restrictions governing nonbank banks. [De-regulation, big time!]

Provides for a study of the use of subordinated debt to protect the financial system and deposit funds from "too big to fail" institutions and a study on the effect of financial modernization on the accessibility of small business and farm loans.

OK: This week, debate has been raging in DC concerning all this! Washington Mutual was 'too big to fail' so it was what? Broken up? Or did all the juicy parts get sucked up by JP Morgan? Of course! Everyone is watching passively as JP Morgan sucks down all rivals! So what is JP Morgan?

A bubble! And on top of that, trying desperately to reach 'Mega-too-big-to-fail' status! And the use of subordinated debt as protections? WOW.

In finance, subordinated debt (also known as subordinated loan, subordinated bond, subordinated debenture or junior debt) is debt which ranks after other debts should a company fall into receivership or be closed.

Such debt is referred to as subordinate, because the debt providers (the lenders) have subordinate status in relationship to the normal debt. A typical example for this would be when a promoter of a company invests money in the form of debt, rather than in the form of stock. In the case of liquidation the promoter would be paid just before stockholders -- assuming there are assets to distribute after all other liabilities and debt has been paid.

Subordinated debt has a lower priority than other bonds of the issuer in case of liquidation during bankruptcy, below the liquidator, government tax authorities and senior debt holders in the hierarchy of creditors. Because subordinated debt is repayable after other debts have been paid, they are more risky for the lender of the money. It is unsecured and has lesser priority than that of an additional debt claim on the same asset.

Subordinated loans typically have a higher rate of return than senior debt due to the increased inherent risk. Accordingly, major shareholders and parent companies are most likely to provide subordinated loans, as an outside party providing such a loan would normally want compensation for the extra risk.

Corporate issuers tend to prefer not to issue subordinated bonds because of the higher interest rate required to compensate for the higher risk, but may be forced to do so if indentures on earlier issues mandate their status as senior bonds. Also, subordinated debt may be combined with preferred stock to create so called monthly income preferred stock, a hybrid security paying dividends for the lender and funded as interest expense by the issuer.

HAHAHA. These newfangled banking entities made PROFITS selling the RISKS of subordinated lending! As I pointed out in the past, the side effect of the free funny money regime of Greenspan was that people had to take greater and greater risks in order to beat mere inflation! So bankers sought 'new instruments' to sell that would carry much higher rates of return. This is why a flood, a tsunami of lending to the most riskiest sectors of the real estate and commercial markets shot through the roof!

The world's #1 and #3 economies wanted desperately to make easy money but couldn't do this via simpler systems due to the Bank of Japan and the Federal Reserve both dropping interest rates to the cellar. So homeowners in America who put 20% down and qualified for the lowest lending rates were PURE POISON to these bankers but the 0% down crew that had to get 9% interest rate loans, etc, these SUB-PRIME borrowers were viewed as pure gold!

This is what happens when the Fed foolishly ignores real inflation. People imagine, if they are good credit risks, they will be beloved by the bankers. But in the upside-down world of sub-inflation rate lending, we get the exact opposite! The BAD BORROWERS are valuable and the GOOD BORROWERS become pure poison. But any banking system that depends on spendthrifts who go bankrupt for profits will end up where ours is: bankrupt.

Streamlines bank holding company supervision by clarifying the regulatory roles of the Federal Reserve as the umbrella holding company supervisor, and the State and other Federal financial regulators which ‘functionally' regulate various affiliates.

Prohibits FDIC assistance to affiliates and subsidiaries of banks and thrifts. [This was inserted by the Democrats in Congress]

Allows a national bank to engage in new financial activities in a financial subsidiary, except for insurance underwriting, merchant banking, insurance company portfolio investments, real estate development and real estate investment, so long as the aggregate assets of all financial subsidiaries do not exceed 45% of the parent bank's assets or $50 billion, whichever is less. To take advantage of the new activities through a financial subsidiary, the national bank must be well capitalized and well managed. In addition, the top 100 banks are required to have an issue of outstanding subordinated debt. Merchant banking activities may be approved as a permissible activity beginning 5 years after the date of enactment of the Act.

Provides for national treatment for foreign banks wanting to engage in the new financial activities authorized under the Act.

The negotiations going on this weekend concern this section of the banking reforms that utterly failed and ruined the entire US banking systems. Namely, the FDIC has to assist everyone or the whole mess will turn into a Great Depression. The hedges and assurances of this bill passed a mere 10 years ago are going out the window.

When this bill was passed, the national banks were NOT 'well capitalized and well managed' at all. Look at Citigroup's stocks from just before they got the exemptions! It was in the toilet. The exemptions allowed it to balloon rapidly in value! Also the pathetic timeline here: these laws were to take effect in 5 years! That would mean, by 2004. Right when Greenspan was busy bailing out the woefully undercapitalized banks with his 1% lending to them from the Federal Reserve!

TITLE VI -- FEDERAL HOME LOAN BANK SYSTEM MODERNIZATION

A new, permanent capital structure for the Federal Home Loan Banks is established. Two classes of stock are authorized, redeemable on 6-months and 5-years notice. Federal Home Loan Banks must meet a 5% leverage minimum tied to total capital and a risk-based requirement tied to permanent capital

Equalizes the stock purchase requirements for banks and thrifts.

Voluntary membership for Federal savings associations takes effect six months after enactment.

The US was moving rapidly towards the 0%-0%-0% Japanese system. Dropping the leverage minimum to just 5% is very inflationary as well as creates bubbles while undercapitalizing the banks! As China raised their own reserve rations relentlessly upwards, the US dropped our own ratios. This is also a big part of our banking collapse. The Federal Reserve's position in world FOREX reserves fell dramatically in the last 20 years and especially in the last 7 years. Our undercapitalization of our entire banking system from the lowliest thrift to the highest unthrifty levels, this is why our entire banking system is collapsing.

Congress, the Treasury and the Fed sparred and yakked for hours while I fumed. Not once did any of them talk about any of this. This article is required reading for all of them, especially Beranke. He might even learn something from my economic cartoon collection I included here which I published on the magic number day that signified the beginning of the collapse of the banking lending bubble.

Now, for entertainment, some good You Tube links provided by the very good, very busy readers of our news service:

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