10/14/20008
Elaine Meinel Supkis
The very, very expensive, overly-indebted houses in California are burning down as per usual at this time of year. The infinite bail out that has virtually no strings attached is now causing global stock markets to shoot to the moon. The Goddess of Inflation has infinite powers! The game today is for all the Wall Street entities to pretend they are being forced to be bailed out. But if we read the information embedded within the stories, we see this is a propaganda point set up to deflect taxpayer anger. In turn, we all get lots of goodies this Xmas and Santa Claus will shower us with more, in the future. All made in Asia, of course.
U.S. Forces Nine Major Banks To Accept Partial Nationalization
The U.S. government is dramatically escalating its response to the financial crisis by planning to invest $250 billion in the country's banks, forcing nine of the largest to accept a Treasury stake in what amounts to a partial nationalization.
*snip*
The Treasury Department's decision to take equity stakes in banks represents a significant reversal, coming just weeks after Treasury Secretary Henry M. Paulson Jr. had opposed the idea. In a momentous meeting yesterday afternoon in Washington, Paulson, flanked by top financial regulators, told the executives of nine leading banks that they needed to participate in the program for the good of the national economy, two industry sources said on condition of anonymity because they were not authorized to speak publicly.
*snip*
Federal officials set conditions, telling the banks they could not raise their dividends without government permission and could not offer their executives new retirement packages, though the old packages would remain intact.
OK: they won't be allowed to loot this windfall totally. BUT neither are they punished in any way, shape or form. Indeed, they get to keep their wealth as well as their future, fat retirement packages! In return, they get INFINITE money. Thanks to Pelosi, Paulson has access to all the infinite future wealth of US taxpayers and this is fine with everyone involved. They all want and need this power. This is pure power.
Time to revisit the issue of the Cave of Wealth and Death: within the powers of the creatures that inhabit this dire place is the power to hand over the planet earth to ruthless people who will destroy all humanity. This is why we cannot just stroll into this cave and take whatever. The divine beings that haunt this place will offer total power and fools will grab at this. 'Give me the power to blow up everything with huge nuclear fission bombs!' cries the President of the United States.
'OK, a great choice', says the Death God who hands his scythe to the mortal leader. Off he goes and merrily butchers women, children, cats, birds, horses, the elderly, school girls, shop keepers, insects, everyone in two cities. Boom. Dead and vaporized! Oh, a great success story, that!
The gnomes who run our economic systems go into this cave every day. And ask for the same thing: 'Make us richer and richer, more and more.' The Goddess of Inflation always says, 'You know, you will have to kill and loot other nations to do this?' And the gnomes say, 'Kill them all! Give us the money!'
So she hands it over with glaring, happy eyes. She sharpens her dinner knives, forks and spoons, preparing herself to dine in glorious joy. The gnomes are extremely happy today. They will pull unhappy faces in public but are shaking hands and whooping with joy. They punished the US people severely enough so that even the most aware of voters, the most astute economics analysts outside of a very tiny, online minority, will proclaim the emergency is now over since we asked this goddess for help and she granted it.
Paulson Lacks Leverage to Compel Banks to Put New Cash to Work
(Bloomberg) -- Treasury Secretary Henry Paulson persuaded nine major U.S. banks to accept $125 billion in government investment. Getting them to lend it out may prove a tougher sell.The equity stakes the government is purchasing in Citigroup Inc., Morgan Stanley and seven other big institutions come with no guarantee that the investments will spur lending and unfreeze credit markets. Nor do they give the government board seats or any other leverage to demand that that the firms actually use the money to help the economy.
``The truth of the matter is, they can't put a gun to their head and say you have to lend this money,'' said Charles Horn, a former official at the Office of the Comptroller of the Currency, part of the Treasury Department, and now a partner at the Mayer Brown law firm in Washington.
Who could possibly imagine that the gnome from Goldman Sachs, the man I call 'Gollum' would engineer a plan that would give us ZERO leverage in this grant, hideously expensive rescue? HAHAHA. Of course! The last thing on earth Gollum wanted to do was give anyone who might be his successor, any powers over any of his banking pals! This is not due to him trying and trying. This was done maliciously and deliberately. He is the problem, not the solution.
The problem was, how to engineer a massive capitalization of all the reckless banks that screwed up so badly while not imposing even the slightest reforms, the tiniest changes or punishing any of the criminals responsible for this epic banking collapse! The guy from the Treasury who claims, 'You can't point a gun at their heads...' is nuts.
The government points plenty of guns at heads! Try refusing to pay taxes. The government will literally attack you with armed paratroopers who will shoot your dog and burn down your armed enclave. They will kill your entire family if necessary! So of course, gun pointing is easy to do and is done regularly. All these guys are trying to do is fill us with despair and to shrug their shoulders and say, with a smirk, 'You can't stop US!'
And no one is stopping our criminal classes from committing crimes! Our dire rivals love this and encourage this and hope we do more stupid things and let these guys get off, scot-free and without any hinderances.
As time flashes by, I am increasingly convinced that the countries like ours that are going bankrupt...except for the poor Icelanders who are like Lehman Brothers, the sacrificial lambs...all the main debtor nations have been granted by all the creditor nations which are China, Japan, OPEC and Russia, pass to inflate world finances .
Global output rose by 5.2% in 2007, led by China (11.4%), India (9.2%), and Russia (8.1%). The 14 other successor nations of the USSR and the other old Warsaw Pact nations again experienced widely divergent growth rates; the three Baltic nations continued as strong performers, in the 8%-10% range of growth. From 2006 to 2007 growth rates slowed in all the major industrial countries except for the United Kingdom (3.1%).Analysts attribute the slowdown to uncertainties in the financial markets and lowered consumer confidence. Worldwide, nations varied widely in their growth results. Externally, the nation-state, as a bedrock economic-political institution, is steadily losing control over international flows of people, goods, funds, and technology.
Internally, the central government often finds its control over resources slipping as separatist regional movements - typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Iraq, in Indonesia, and in Canada. Externally, the central government is losing decisionmaking powers to international bodies, notably the EU. In Western Europe, governments face the difficult political problem of channeling resources away from welfare programs in order to increase investment and strengthen incentives to seek employment.
The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. Because of their own internal problems and priorities, the industrialized countries devote insufficient resources to deal effectively with the poorer areas of the world, which, at least from an economic point of view, are becoming further marginalized.
The introduction of the euro as the common currency of much of Western Europe in January 1999, while paving the way for an integrated economic powerhouse, poses economic risks because of varying levels of income and cultural and political differences among the participating nations.
The terrorist attacks on the US on 11 September 2001 accentuated a growing risk to global prosperity, illustrated, for example, by the reallocation of resources away from investment to anti-terrorist programs. The opening of war in March 2003 between a US-led coalition and Iraq added new uncertainties to global economic prospects. After the initial coalition victory, the complex political difficulties and the high economic cost of establishing domestic order in Iraq became major global problems that continued through 2007.
HAHAHA. The CIA admits that bin Laden's strategy of having the US bankrupt itself trying to defend itself from a tiny band of determined attackers? And the developing, third world countries are being 'marginalized'? HAHAHA again. Seems that every time China shows interest in these 'marginalized' nations, the US goes ballistic. Not to mention one of the most 'marginalized' nations on earth, Afghanistan, is the biggest narco state on earth thanks to the US invasion enabling massive heroin production there! And Afghanistan is bankrupting the US, to boot. As bin Laden clearly hoped.
Now, from last year's CIA statistics, we can clearly see how the USA is in total trouble with the top for industrial powers, China, Japan and Germany:
Click on images to enlarge.
I chose four nations to compare: China, Japan, Germany and the USA. Each is color-coded so we can see them in groups of four. First is the trade surplus/deficit: the three trade rivals of the USA are all in the green, the USA, in the red.
China has the biggest trade surplus while Germany and Japan run neck to neck. The USA is in the red nearly exactly the same amount as all three rivals are in the green. This isn't coincidence. This is BECAUSE the rivals are in the green. When we look at the list of exports/imports we see something very astonishing. The US and China both export nearly the same amount. The problem is, the US imports far more than it exports despite this huge increase in export industries.
Next is the reserves/monetary/debt business. The contrast in reserves is astonishing.
Asia has, overall, nearly $4 trillion in FOREX reserves. China and Japan have nearly $3 trillion, the bulk being in China. Germany has a far, far smaller reserve but look at the US: it is nearly nothing at all! The German stash is more than twice as large. This would be no big deal except for all the other statistics I highlighted here!
China's external debt is only $363 billion. Japan is worse off by a factor of 4: $1.5 trillion held by foreign powers. Germany is 4 times worse off than Japan at $4.5 trillion. But the worst off of all is the US: A whopping $12.25 trillion held by foreign powers!!!! YIKES. This is nearly exactly double what our three top trade rivals owe to the planet's people!
China and Germany have nearly the same foreign investment at home which is nearly a trillion dollars. But Japan, dear old Fortress Japan has virtually NO foreigners polluting their system and they are extremely pleased about that! Then there is the usual basket case of the US: ours is bigger than all three trade rivals. A very bad sign.
Outflows: the Chinese actually invest very little abroad. Most of their money is used domestically, building a great nation. Japan sends half a trillion abroad. Germany, nearly a trillion due to its key position in the European Union and its desire to remake the Holy Roman Empire and pull all of Eastern Europe into its orb again. But the US sends out nearly a trillion more than we get in foreign investments. This is disinvesting in the US by our corporate gnomes and bankers. The ones Paulson is rescuing.
New York Times editorial: Mr. Paulson’s Client
Call it bailout, take two. With credit markets frozen and the financial system teetering on collapse, Treasury Secretary Henry Paulson has decided to invest $250 billion directly in the nation’s banks in exchange for an ownership stake. It is a bold move for a desperate time. But Mr. Paulson still has to do more to ensure that American taxpayers, whose money he is investing, get the best deal.
*snip*
But we are disturbed that Mr. Paulson wants the government to be a passive investor with little say on how these banks are run, despite the billions of dollars at risk.That means the banks’ current boards and current management — the same people who got the country into this mess — will still be making all of the decisions.
*snip*
That idea has always suffered from an inherent conflict of interest: the financial firms with assets to sell are in many instances the same firms the Treasury will rely on to value and manage the assets it is buying. That is an invitation for these firms to set the price too high or to indulge in other mischief at the taxpayers’ expense.
The NYT won't call for a revolution. They won't call for Bush to be impeached, Paulson arrested and charged with treason. No, they take the passive route. They hope there will be better leaders in the future. Like Pelosi, I suppose? Yesterday's cartoon showed her laughing as Gollum did his best imitation of eating raw fisssshes at last night's White House dinner. Good grief, he even holds his hands as if he is a gnome!
Pluto, one of the commentators at this blog, left a link to a story about a Frenchman who was caught stealing 170 garden gnomes. He should have stolen our gnomes! But of course, they are stealing from US.
Japanese Stocks Soar; Europe Also Posts Solid Gains
By midday trading in London, the FTSE 100 was up 5 percent, the CAC-40 in Paris was 5.8 percent higher and the DAX in Frankfurt rose 5.3 percent.
*snip*
In Europe, bank stocks were again among the leaders, with the French bank Société Générale rising 6.3 percent, and UBS gaining 7.8 percent.In Moscow, the Micex index rose more than 12 percent.
Iceland’s stock market crashed Tuesday when trading resumed after a three-day suspension. The OMX Iceland all-share index fell 66 percent afterg the collapse of the country’s banking system and the nationalization of the biggest lenders. Trading in the largest financial shares remained suspended.
*snip*
By the close in Tokyo, the benchmark Nikkei 225 stock average, which lost a quarter of its value last week, was up 14.2 percent to 9,447, helped also by government assurances that the Japanese authorities stood ready to shelter the economy if necessary. The gains were also spurred by central banks’ extraordinary injection of liquidity into the money markets. The Bank of Japan’s overnight rate, for example, reportedly fell as low as 0.15 percent, well below the bank’s 0.5 percent target.The Japanese finance minister Shoichi Nakagawa unveiled measures on Tuesday that included a possible injection of public funds into regional banks, and said the government would consider a temporary freeze on the sale of government-held shares on the secondary market. Another factor cheering markets was Mitsubishi UFJ’s agreement Monday to buy a 21 percent stake in Morgan Stanley, which lowered the risk of the latter’s collapse.
The US isn't buying banks in Japan. Japan is buying in the US. And to do this, the government is assisting the take overs. They can't believe their luck. Just as they were facing the real possibility that the US would use its nasty, old, dusty trade weapon, a bad recession, to correct our huge trade deficits, the US is panicked into running up epic deficits even greater than before. So Japan continues its buying spree! While we can't buy out them at all. The Nikkei goes nuts and shoots upwards on this glad news.
Bank of Japan Offers Unlimited Dollars to Banks
(Bloomberg) -- The Bank of Japan said it will offer lenders as many dollars as they want, joining European counterparts in attempting to lower borrowing costs in money markets and freeing up credit worldwide.The central bank will provide dollars at fixed interest rates for an ``unlimited amount against pooled collateral,'' it said in a statement late yesterday. It also announced measures to improve companies' access to cash, expanded the range of Japanese government bonds it buys from lenders, and suspended a program of selling shares it bought from banks between 2002 and 2004.
The Bank of Japan's supply of dollars comes from an agreement with the U.S. Federal Reserve last month to swap as much as $120 billion for yen. The increase to unlimited dollar supply came a day after the Fed removed caps on swap lines with the European Central Bank, Bank of England and Swiss National Bank. The Fed confirmed in a statement the same move for Japan.
Remember: every time we see the words 'unlimited' associated with 'money' and 'lending' we are looking deep into the dark, fatal eyes of that dangerous sister of Medusa, the goddess of Inflation. We can see her eyes are ablaze like the California landscape. She is filled with glee, anticipating what will happen next! How on earth can anyone responsible for this planet's finances write the word 'unlimited' and not scream and jump out the window?
This is baffling, frankly. Online, we see a good number of smart people who howl with rage every time a banker says, 'Unlimited lending' or 'Infinite dollars' or 'more liquidity.' Frankly, these guys are being utterly reckless and irresponsible because it is very popular, very briefly. Hey, print up lots of money and then disgorge it, no strings attached! This is why Paulson is proud of getting dictatorial powers from Congress and using it to bail out his buddies and allow us peons no say in this matter. They all want infinite money to do infinite games. They want no restrictions and have thrown Libra out the door.
Only she never went away! She just sighs and tells her sisters to have fun ravaging everyone in the future. She knows, in the bitter end, she will take over and reset things again even if it has to be from zero.
THE ASAHI SHIMBUN
Government to freeze its share sales to aid prices
To ease selling pressure on domestic stocks, the government plans to freeze the sales of shares it acquired during past financial turmoil, Finance Minister Shoichi Nakagawa said Tuesday.It also intends to revive legislation to enable public-fund injections into faltering regional banks and extend a mechanism to protect life insurance policyholders with taxpayers' money, he said.
The steps are the cornerstone of a policy package Nakagawa announced to cushion the blow from the global financial crisis.
"Japan's financial system remains stable, compared with what's happening in the United States and Europe," said Nakagawa, who doubles as state minister in charge of financial services. "We have put together the measures that we need right now, after taking into account falling share prices and other factors."
HAHAHA. Note how the Japanese finance minister smugly says that Japan is STABLE unlike Europe and the US. As we look at the CIA statistics, we can see that depressed Japan is beating the hell out of us all. Their only worry is, China is even stronger. For both Japan and China are CREDITOR states! Both intend to use this power for political and economical leverage. Both will succeed if we go the 'unlimited debt' route.
Rush to put private commodities contracts on exchanges
Commodities traders are rushing their private bilateral contracts into exchanges and clearing houses as they race to reduce their counterparty risk amid a deepening financial crisis.The transfer of the opaque over-the-counter deals comes as observers warn that commodities, where trading has ballooned in the past five years, could be the next market hit by counterparty failures.
This is all about the hell hounds and pirates of the Caribbean. They made profits playing commodity markets using the Japanese carry trade lending stream. This dried up when the yen went strong and the US economy teetered on total collapse. Now that unlimited lending at 0% rates is the norm from the central bankers of Europe, Japan and the US, why can't these guys just play the game some more?
They can't right now because the nature of money flows. Commodities are dropping due to people using less thanks to the high prices provided us from these same speculators. They drove up every possible commodity to their peaks and now all must fall until the unlimited funds flow out of the banks and into the hands of speculators again. Who will again, drive up commodity prices! This vicious cycle is called 'inflation'. And it goes in waves, not relentlessly upwards except at its final, most toxic hyper-inflation stage.
U.K. Inflation Reaches Fastest Since at Least 1997
(Bloomberg) -- U.K. inflation quickened to the fastest pace in at least 11 years in September, squeezing consumers with higher living costs as the financial market crisis curbed the availability of credit.Prices rose 5.2 percent from a year earlier, the most since records began in 1997, the Office for National Statistics said in London today. The median forecast of 32 economists in a Bloomberg News survey was 5 percent. Inflation has now exceeded the Bank of England's 2 percent target for a year.
The central bank cut the benchmark interest rate last week by half a point to 4.5 percent after an emergency meeting. The crisis of confidence in the banking system and lower commodity prices have raised the risk that inflation may slow below the target, policy maker Andrew Sentance said yesterday.
Combining 0% lending with inflation: Japan is doing this and doing just great! The hope is to transport this inflation out of the country via trade. The weak nationalist currency helps trade immensely. The yen struggles to regain its weak status. It keeps getting pushed downwards only to rise again and each time, this hammers Japanese investors in the Nikkei. But then, we see that they are investing a great deal overseas! So they don't mind a lousy stock market at home.
Here is a Washington Post editorial:
Given that the United States has held itself up as a global economic model, the change could shift the balance of how governments around the globe conduct free enterprise. Over the past three decades, the United States led the crusade to persuade much of the world, especially developing countries, to lift the heavy hand of government from finance and industry.But the hands-off brand of capitalism in the United States is now being blamed for the easy credit that sickened the housing market and allowed a freewheeling Wall Street to create a pool of toxic investments that has infected the global financial system. Heavy intervention by the government, critics say, is further robbing Washington of the moral authority to spread the gospel of laissez-faire capitalism.
*snip*
Other than a few fringe heads of state and quixotic headlines, no one is talking about the death of capitalism. The embrace of free-market theories, particularly in Asia, has helped lift hundreds of millions out of poverty in recent decades. But resentment is growing over America's brand of capitalism, which in contrast to, say, Germany's, spurns regulations and venerates risk.
Laissez-faire capitalism in the US never existed. We have crony-capitalism which is 100% about looting an empire by bribing politicians to look the other way. Our war effort has cost us an extra trillion dollar fighting civilians who are barely armed. This hyper-expensive warfare is all about Daddy Warbucks getting rich, looting the Treasury. Now, the bankers have united with the warmongers to totally destroy the Treasury and to not only drive up our debt spending by a trillion a year or more, they are destroying our infrastructure, deindustrializing our entire nation and driving us all into debt. This is criminal. It is treason. And it should be stopped.
Only most of Congress is multi-millionaires. Our President and VP both make their massive incomes via warmongering and oil. They loved it when the price of oil shot upwards during their entire rule! They came out of this, filthy rich. They don't care that they destroyed our lives. They want us to pay them tribute. This sort of anti-nationalism from the top is why all empires rot and go to hell.
The Fed lent money to banks at far below 1% interest rates:
Release Date: October 13, 2008For release at 2:00 a.m. EDT
In order to provide broad access to liquidity and funding to financial institutions, the Bank of England (BoE), the European Central Bank (ECB), the Federal Reserve, the Bank of Japan, and the Swiss National Bank (SNB) are jointly announcing further measures to improve liquidity in short-term U.S. dollar funding markets.The BoE, ECB, and SNB will conduct tenders of U.S. dollar funding at 7-day, 28-day, and 84-day maturities at fixed interest rates for full allotment. Funds will be provided at a fixed interest rate, set in advance of each operation. Counterparties in these operations will be able to borrow any amount they wish against the appropriate collateral in each jurisdiction. Accordingly, sizes of the reciprocal currency arrangements (swap lines) between the Federal Reserve and the BoE, the ECB, and the SNB will be increased to accommodate whatever quantity of U.S. dollar funding is demanded. The Bank of Japan will be considering the introduction of similar measures.
Central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets.
Japan is the expert at 0% lending. This is how they fixed their economy after their big, fat balloon that busted in the 1990 recession. Which we better remember was due to oil prices shooting upwards due to Saddam attacking Kuwait. Japan went turtle after that collapse and during a decade of US pushes for 'free trade,' Japan shut down our ability to export to Japan except for food and commodities like US oil from Alaska. They did NOT want our finished goods. Except for Boeing jets. These massive, expensive items gave the appearance of them buying our stuff. Only they worked day and night to transfer as much of the Boeing construction to Japan. And they succeeded.
For the past three years, Chaturvedi has been a top collection agent at her call center, phoning hundreds of Americans a day and politely asking them to pay up. As the U.S. financial crisis plunges Americans into debt, her business is one of the fastest-growing sectors in Indian outsourcing. It is also one of the few sectors of outsourcing in India that is still hiring aggressively.Sitting in a narrow cubicle, her head-set switched on, Chaturvedi listens every night to increasingly disturbing tales of woe from the other side of the globe.
"My mortgage payments are just too high, honey. I just can't make the payment this month," a weeping woman with a Southern accent recently told her in response to a call for a $200 credit card payment. "I'm sure y'all heard about the credit crunch and gas prices. I'm flat broke."
"Ma'am, I am here to help you," Chaturvedi calmly said. "Ma'am, maybe you could make a small payment, $100 or $50, anything that you can."
This is just too embarrassing. Not only that, our trade rivals just want us to keep up some payments so we don't actually default on their massive loans to the US. Just a little bit keeps things going. And note that the US allows India to call Americans to demand money. This money is for whom?
HAHAHA. GRRR! It is for exactly the same, damn, blasted, stupid, nasty banking gnomes who destroyed our nation! The same greedy, grasping, vicious monsters who are demanding they get 0% fucking interest rate loans from central banks, courtesy of the same people they are victimizing with 33% loans on revolving credit!!!!
Blast them all! And they save money so they can party by hiring cheap labor in India! Which makes our trade balance worse. They are traitors. Criminals. Arrest them all! And Gollum, their leader in the Treasury!
Elaine,
Based on your figures above, my thoughts are China is more likely to save third world countries first rather than US or any of the G7 due to bigger bang per buck. It can buy influence in the UN that way very cheaply and build up the base for Pax China.
Only way for US or G7 to be saved by China is to drop to third world status or after hyperinflation. Am I going off the track big time here??
And by the way, I hope u have a wonderful birthday celebration with your family.
Posted by: OC | October 15, 2008 at 04:57 AM
On a sour note, I read an web article that close to 1000 US weapon researchers have been laid off (shades of USSR) - they would most likely be working for the Chinese soon enough and hopefully before the Europeans.
Posted by: OC | October 15, 2008 at 05:00 AM
Enquiring minds can pick up on the background to these "shenannigans" at patriot sites like Barefootsworld.net
or apfn.
It seems the US is bankrupt, and has been since 1930. Just google The Bankruptcy of America
At barefootsworld under "The Bankruptcy of America" or "Who is really running America", the reason for the existence of FEMA is explained. Heavy Stuff!
Please excuse me that I`m not directly linking to the articles, I`m not skilled with computers (autodidact)
Posted by: Rowan | October 15, 2008 at 05:26 AM
I agree - this money shit is getting tedious.
Plus, those foolish weapon researchers (what a pathetic job of death) should consider using their knowledge to gain a little empathy if they are capable of such. I think further weapons reasearch is damn near inconceivably stupid. We don't need any more weapons - we can kill each other like there ain't no tomorrow - no need for further refinement. Hell, we can send in drones to do the dirty work, but their is always somebody behind each drone and machines always break down. Always. How bout studying better hand tools or something of value? Jerks.
Later,
Ken
Posted by: Buffalo Ken | October 15, 2008 at 09:10 AM
We must examine the rescue operations now, using history as our guide.
Posted by: Elaine Meinel Supkis | October 15, 2008 at 09:16 AM
The quote below is from the download, here: http://www.mediafire.com/?zwqk3i2mt2y
Conjure Bag Discussion Paper
LIBOR, Interbank Lending and The Banking Crisis
Since August 2007, the spread between the highest and lowest rates contributed by members of the Contributor Panel has been rising. These spreads are not what we’d expect to see in functioning markets and suggest that the Contributor Panel is pulling numbers out of thin air.
Yves Smith states:
Prior to August 2007, it was unusual if the variation between the highest and lowest reporting bank was more than 1 or 2 basis points. Now it is regularly above 100 bps. As we like to say, a number so big no one understands it.
Too much central bank liquidity has destroyed the inter-bank lending market. [emphasis- Yves Smith] This would be an “inside baseball” issue for the banking system except Libor is the benchmark for the “real economy” to get a loan. Libor is written into contracts and we have no good substitute. If Libor is screwed up, then the real economy pays because it needs Libor to get a loan.
This also means the market’s new favorite idea of having G7 countries guarantee all inter-bank loans will do nothing.
I’ve come to the conclusion that the $US BBA LIBOR may now be bogus, as well as any
instrument priced on it. If that conclusion is correct, it means the TED Spread is bogus as well. There is also an additional, more diabolical, consideration.
Consider the possibility that $US BBA LIBOR and TED Spread might no longer be an expression of “market jitters,” but a fabrication used to torture central bankers, particularly Bank of England, for more $US liquidity. Fear can flow both ways, and the London banks may be using BBA LIBOR as a stun gun.
Yves Smith is probably correct when she says central bank liquidity is destroying the London interbank market. Why borrow in the interbank market when you can borrow from the central bank?
Finally, and obviously it would seem, stay away from BBA LIBOR-priced financial products for the foreseeable future. In a future discussion paper, I’ll address the ideas discussed here in greater detail.
Very disturbing. Diabolical another word that comes to mind. If this can be validated then we are well into the end game of this charade. We should change the meaning of the acronym of the VIX index to "Viciously Intentional Extermination".
Posted by: carli | October 15, 2008 at 09:30 AM
"We must examine the rescue operations now, using history as our guide."
"The stock market’s false rallies—what history tells us"
"By Tom Eley"
15 October 2008
"In the “Great Crash” of 1929 there were a number of big single-day increases on the stock market, but the overall trajectory was down. Between October 1929 and July 1932 there were five increases of the Dow of more than 9 percent, including the market’s second biggest day ever, Oct. 6, 1931, when stocks surged by nearly 15 percent. What is remembered about these “rallies,” however, is that they were fleeting moments in a longer downward spiral—and instants in which many investors gambled and lost. The stock market did not bottom out until July 1932, having lost 82 percent of its value."
"Temporary upswings in share values are a feature of periods of crisis, which seem to accentuate the speculative characteristics of capitalism. As Friedrich Engels explained in Socialism: Utopian and Scientfic (1880), crises, as they convert “the great establishments ... into State property,” show how capitalists have “no further social function than that of pocketing dividends, tearing off coupons, and gambling on the Stock Exchange, where the different capitalists despoil one another of their capital.”"...
http://tinyurl.com/3mseb7
Posted by: Tell | October 15, 2008 at 09:35 AM
Great declines also have highest highs due to fewer and fewer traders as the masses are wiped out and only the pros run by the biggest banking/investment houses remain.
Posted by: Elaine Meinel Supkis | October 15, 2008 at 10:03 AM
So OK, these "military researchers" --- I betcha they all made some real good funds during their esteemed careers - well then, what better time to be unemployed?
Who needs the rat race especially when it ain't nothing but a race to death? Why not just getcha a nice place with a little land and make it fit in as best you can?
Hell, a bunch of damn lawyers should consider doing this also. The bankers better be careful cause I get the feeling folks ain't all that pleasantly disposed towards bankers and wallers and DC'ers at the present moment.
That's just my goddammed Constitutional 1st Amendment opinion. You can't take it away, but I suppose you could try. Good luck cause your gonna need it even if you do have f***** drones flying all over the place. Down with the drones. Down with all the "airplanes". They should just be grounded. Especially the military ones. Ground em. Re-engineer em into something of value or scrap em. Simple. Right?
Peace,
Ken
Posted by: Buffalo Ken | October 15, 2008 at 10:07 AM
OK - I did say this money stuff is getting tedious, so I suppose that is why I was interested in discussing another topic. Anyhow, I'm gone....
Peace,
Ken
P.S. Elaine - I hope you have the chance to start posting on some of you other blogs before too long...
Posted by: Buffalo Ken | October 15, 2008 at 10:10 AM
"Great declines also have highest highs due to fewer and fewer traders as the masses are wiped out and only the pros run by the biggest banking/investment houses remain."
Correct.
But you must remember Elaine anybody for any reason (which is about all of us)are capitalists...Rmember now Elaine...you get what you vote for. And lets face it even after vote rigging it is true to say people in the main are still right wing.
I remember back in 1945 to 1954 people in the UK wanted Socialism (then the memory of war faded,greed set in)the good old USA seen to that...
http://tinyurl.com/54feye
Posted by: Tell | October 15, 2008 at 10:28 AM
This whole bailout thing is totally absured. The American people are underwater with too much debt. How can the FED and Treasury print money on behalf of the American taxpayer (who is broke) "inject" it into banks, all in the hope that these same broke Americans will than line up at the banks to borrow their OWN FUCKING MONEY AT INTEREST from these same bankrupt gnome infested banks? To spend on imported products from Asia? This is totally assenine. IT WILL FAIL MISERABLY. We must END THE FED as fast as possible. They are a cancer destroying our once great industrial nation. Fuck the FED,Paulson,Bush,Cheaney,Rumsfeld,Bernanke,Mishkin,Feldstein,Plosser,Yellin,Blankfein,Geithner(sounds like roll call for synogogue)etc...etc... They are all statist criminals.
Posted by: ralph | October 15, 2008 at 10:35 AM
Plosser,Yellin,Mishkin,Feldstein,Geithner,Bernanke,Cohenetc.. etc..
Posted by: ralph | October 15, 2008 at 10:37 AM
Well Ralph, I believe the market agrees with you! DOW down 362pts. just 20 minutes into the session. The magic of illusion is quickly fading, that and fake money.
Posted by: carli | October 15, 2008 at 10:52 AM
Elaine, why would anyone be amazed at Pope Hankypanky Paulson's actions? His basic training of lying, absconding, and underminding the US government were under the tutelage John Ehrlichman during the Nixon administration. Hankypanky learned well at Papa Ehrlichman's knee. Pope Hanky succeeded beyond Ehrlichman's dreams of imperialism. And best of all, how to avoid prison.
Henry Paulson was John Ehrlichman’s assistant in 1972 and 1973.
Refresher: Ehrlichman created "The Plumbers", the group at the center of the Watergate scandal, and appointed his assistant Egil Krogh to oversee its covert operations, focusing on stopping leaks of confidential information after the release of The Pentagon Papers in 1971.....Ehrlichman's main functions during his years in the White House, to seek and destroy Nixon's enemies at virtually any cost, a function that would overshadow his domestic efforts in a White House consumed with foreign policy....Ehrlichman was convicted of conspiracy, obstruction of justice, perjury and other charges on January 1, 1975.
Ahhhhh, the good ole' days before Congress was totally bought and sold for campaign contributions. And some congress critters had a modicum of honesty.
Notice how the majority of these assclowns came outta the Nixon years?
Posted by: rockpaperscizzors | October 15, 2008 at 11:02 AM
"and underminding the US government"
Correction: and shredding the US Constitution.
Posted by: rockpaperscizzors | October 15, 2008 at 11:13 AM
100% correct, Rockpaperscizzors.
Posted by: Elaine Meinel Supkis | October 15, 2008 at 11:14 AM
Nancy Pelosi sold her soul to the power elite in Washington DC. She did this so she could be House Speaker AND so she could jet around the Middle East and practice at being Presidential. The White House being her ultimate goal. How nice for the taxpayer. Another politician who is willing to whore themselves so they can have POWER. I just love her latest spending bill. $300 billion for things such as rebuilding US highways and bridges. The bill has the look of an afterthought. First the $630 billion spending bill (pork), then $700 billion for the Wall Streeters (and counting--plus the added pork). Then and ONLY then, do we get anything in the way of spending that even LOOKS like legitimate government spending. We are DOOMED. I think that secretly the Repubs do not WANT the White House this coming election. They know what's looming on the horizon. Who knows? Maybe, long term, something good will come out of this disaster.
Posted by: Paul S | October 15, 2008 at 11:23 AM
Hi Elaine,
Hope you had some fun on your birthday!
Hyper-inflation versus Depression
In the 1930's the world was still on the gold standard, and the ultimate "bank job" was to break into Fort Knox.
How will the stock market behave over the next 2 years with total fiat money and lots of it!
I don't know anything about Germany's stock market in the 1920's, but things are very different today.
Total "Trust Me" world currencies.
Value by fiat.
Will the stock market "re-inflate" one more time! Not for one day, but for months; maybe a year or two.
What if you play the game Monopoly, and one player has all the properties, all with hotels, and has bankrupted the the players, but THERE IS STILL BEER IN THE KEG so you all want to keep playing?
So you get some orange paper and photocopy Monopoly $500 bills. Then what happens!
First, everyone chugs a mug. Then there are no rules!
Everyone in the game has fresh money! So the players start making deals for properties, to keep the game going. Ignore the prices on the board! Go Nuts! 'Park Place' is still worth 8 times as much as 'Baltic Avenue'. But It'll cost you $45,000 instead of $450. Ha...HaHa!
Time out, I have to pee and put more orange paper in the copier he-he.
And 'GO TO JAIL'?
I miss one turn. Enough time to go refill my beer-mug.
ELAINE! WHERE ARE THE PRETZELS!
Posted by: chorddog | October 15, 2008 at 11:36 AM
Rockpaperscissors,
I was watching a PBS show "The American Experience" about Nixon a couple of nights ago. It was quite a revelation to find that our current political problems, especially the non-stop dishonesty and slander in politics, all stem from the conduct of one Richard Milhous Nixon -- even as far back as the fifties! And of course, Nixon's red-baiting contributed in no small part to our expensive quagmire in VietNam, which Nixon, once he got into office, made even worse and more costly!
Jeez. No wonder we lost the last remnant of the gold standard in 1970.
Posted by: Ed-M | October 15, 2008 at 11:56 AM
Games that are "essentially imaginary" amongst a group of friends are one thing. They are like a model. Great for learning.
Definitive decisions (such as those that come from the government in DC) that involve millions or billions, or trillions, or quignitillions (for all we know) of living often breathing organisms are NOT games. Thats called real life and it sure matters what decisions are made by the "big-decision" makers. It matters for all those who are directly affected. Don't you think?
I feel almost a bit goofy typing this because it seems like it ought be ridiculously obvious, but day-after-day I continue to be amazed as I watch the sad & tragic comedy coming out of DC. What a joke. Its a bad movie. Tedious at best.
Peace,
Ken
Posted by: Buffalo Ken | October 15, 2008 at 11:57 AM
Nixon wasn't alone. I don't know much about him and frankly I don't care just now other than I suppose it is correct that "one thing leads to another" when there ain't no learning going on.
Lets see Bush, Cheney....just about all the rest of em - they were all in the Nixon thing together weren't they? How is it that they still reside in DC? What a mystery.
Peace,
Ken
Posted by: Buffalo Ken | October 15, 2008 at 12:00 PM
From Argentina's experience (brasschecktv.com): 'What a real financial collapse looks like'
There was even a finance minister name Grinspun (@21:06) (in Spanish, the 'i' sounds like 'e')
"Treason has phenomenal political power" (@30:40)
Posted by: RobG | October 15, 2008 at 02:36 PM
Alot of the same sleazsballs were also in that all time phony's administration, Ronald Reagan. You know, the guy who preached against big government and FOR fiscal responsibility while at the same time almost tripling the national debt ($1 Trillion to $2.6 Trillion).
Posted by: Paul S | October 15, 2008 at 03:00 PM
Ed-M, I lived thru the Tricky Dick years. The red baiting propaganda show of the Nixon years has been replayed by Bush in his Arab hating axis of evil tirades. Elaine has referenced many a time Nixon bowing to Chairman Mao's wife and Georgie Bush kissing the ring of the Saudi King and holding hands with Prince Bandar. It's all show when you're busy looting the taxpayer for the military industrial complex
Posted by: rockpaperscizzors | October 15, 2008 at 07:06 PM
The infinite bail out that has virtually no strings attached is now causing global stock markets to shoot to the moon.
Looks more like the mother of all dead cat bounces to me.
Posted by: Neon Vincent | October 16, 2008 at 01:52 AM
Rockpaperscissors,
I didn't live through the early Tricky Dicky years (born just after JFK's election) but I do know enough about history and I also remember his presidency. Ended in lies and squalor.
After that he got an unconditional pardon from Jerry, which basically undermined all the valiant efforts by Congress to bring that rat-bastard to justice. Now we know why the Dems now have just been rolling over for the Reagan, Poppy-Bush and Shrub administrations.
Posted by: Ed-M | October 16, 2008 at 10:24 AM