Elaine Meinel Supkis
An impatient White House served notice Tuesday on banks and other financial companies receiving billions of dollars in federal help to quit hoarding the money and start making more loans.
"What we're trying to do is get banks to do what they are supposed to do, which is support the system that we have in America. And banks exist to lend money," White House press secretary Dana Perino said.
Though there are limits on how much Washington can pressure banks, she noted that banks are regulated by the federal government.
Dana Perino was selected for the same reasons her clone, Palin, is promoted by the Republicans: she is an airhead. Being congenially silly, she plays a good bimbo. The previous one who died was a male bimbo clone of Dan Quayle.
First of all, banks do NOT exist to 'lend money.' They exist to make a profit! If lending money brings profits, they do this. But their chief original function was to HOLD money for others. The only people who could get loans were people who had big holdings in these early banks. Say, you were a merchant. You could cycle in and out of this lending/capital creation entity. A peasant couldn't go to the bank and ask for a loan!
This was true for many, many, many centuries. When poorer people wanted loans, they had to go to a loan shark. Even in my own lifetime as an adult, people who had no capital had to go to the Mafia for loans. If they didn't pay up, they had bad accidents. Like putting on shoes with cement and then falling into the East River at night.
The beginnings of lending to people with no capital, no property was very gradual. When someone wanted to buy a house, and I was very much one of these people back in 1970, you had to put at least 20% down to qualify for a loan. If you wanted to buy on a credit card, and I had one of these, you put some money in a bank account and American Express would then give you your own money back plus a small forward amount in emergencies [which cost extra!] for a fee. I paid no interest unless I tapped into the emergency fund. This card was used when traveling, especially overseas.
The first credit cards were very difficult to gain! You had to have a sponsor if you didn't have property. Like, mom and dad, for example. Then, the laws were changed. The government was lobbied very hard by the bankers to change the usury laws. Once this was done, they flooded the US economy with easy debt that was very hard to pay off. This was due to the increasingly high interest rates.
One of the many tricks they use to trigger these rates is, if you accidentally go over your limit, they don't stop the use of the card. Instead, they silently reset the interest rates due on the ENTIRE BALANCE from say, 9% to 33%. Then, the poor person goes into shock when they see the impossibility of paying off these debts.
This happened to someone dear to me. We bailed out this person for this is why families are far stronger than individuals. I am a hearty believer that families should stick together. The lessons were learned and frankly, I was quite enraged that Sears would sink so low as to play this sort of Mafioso game. Indeed, I boycotted Sears for years due to this ire.
The childish belief that banks exist to only produce loans is why our banking system is dying. Perino isn't the only airhead running things. She is typical, not exceptional. There are many ugly airheads around. I see them in the news every day.
The United States believed in saving money in my youth not because it was good but because the banks demanded this before they lent anything. The process of socialization was rather simple. When I was only a child, I couldn't wait until I could deposit my babysitting loot in my own bank account. I kept this account until the beginning of the banking collapse in 1970. Then, I went to Wells Fargo and had a big fight with them and withdrew all my money.
I didn't go into debt to go to the University. I worked from May to September in a local bar and this paid enough to live on all the year and pay for school fees! And go on vacation. And I didn't work five days a week, either. Life was good fun back then. Heh. And I learned a lot about banking and business chatting with my customers who were sex-starved gnomes and so, eager to have a young thing listen to their war stories.
The late 1960's was America's financial high tide. It was quite wonderful, actually. I was able to buy hundreds of classical records, dresses and my truck as well as other nice stuff just on babysitting money, working part time ON MINIMUM WAGES. In college, I worked only part time [much higher than minimum wage] and had plenty of leisure and came out of this with zero debt while living in my own two bedroom house which cost me $68 a month. My utility bills were about $12 a month. My pay was about $75 a week and sometimes a lot more due to tips. A dollar was worth something back then. Rent was supposed to be less than one week's wages, not the present 50% of income we see so often today.
Anyway, before you could buy a house, the bank wanted you to pay back some sort of loan. I was rather pissed about that requirement when I went to buy my first house. I always paid cash for things and saved! I asked the officer, what should I buy? He said, 'Buy a car.'
'I already have a 55 Chevy which I rebuilt, with cash,' I complained. Well, I had to go into debt to pay for my first child's doctor. Then, I qualified for a mortgage! This illustrates how parsimonious bankers were before Ronnie Reagan.
(Bloomberg) -- Wall Street's chief executives will hunker down and pay bonuses this year in the face of the worst financial crisis since the Great Depression, a taxpayer bailout and mounting political outcry, industry veterans say.
Odds that Wall Street will forgo the payouts are ``slim to none,'' said John Gutfreund, 79, president of New York-based Gutfreund & Co. and the former chief executive officer of Salomon Brothers Inc. ``They're going to have to be a little bit sensitive because politicians, whether they like it or not, are part of their lives now.''
Gnomes are gnomes. Through and through. They aren't just cartoon characters I created. This is their fundamental nature. They are grasping and vicious. They consider the loss of a penny to be worse than dying. They will steal the silverware and eat you out of house and home before giving up a penny. With goddesses, they are foolishly, deliriously generous. But with the people rescuing them, ie, the US taxpayer, they are churlish and snap back.
'Hey! We own the politicians! Try and stop us from looting you schmucks!' snarl the gnome community as they stuff their sacks and rush home. It is very easy to make Wall Street 'forgo their payouts': arrest them all! Then fine them triple of what their payouts would have been. This would be a sharp lesson to these Mafia wannabes.
On November 22, we will be demonstrating in many cities, I hope, demonstrating our ire about the bank rescue and the Federal Private Banking Gnome Headquarters Reserves.
(Bloomberg) -- The U.S. government's $160 billion handout to banks from Niagara Falls to Beverly Hills is going mostly to lenders that need it least, putting weaker rivals at risk of being shut down or taken over, analysts say.
``This has the unintended effect of making the strong stronger and the weak weaker,'' said Gray Medlin, founder of Carson Medlin Co., a Raleigh, North Carolina, investment bank focused on banking deals. ``Banks that are getting bad exams and are under intense pressure from regulators won't be successful in applying.''
I am not surprised by this news. At the Congressional hearings concerning the bank bail bill, officers from top investment banks sat on either side of me and talked with each other over me until one of them suddenly noticed I was writing down what they were saying. Then they clammed up.
They figured, no one would notice a $700 billion bank heist. When I arrived in DC, the firestorm over the proposed rescue plan was so great, all of Congress was seriously worried. Now, they are not so worried. This is bothersome. This being an election year, no one feeds the US political golden goose more goodies than Wall Street and in particular, the banking gnomes. So outrage is rather muted, to say the least.
Instead, we talk about that mythical and fake creature, Joe the sort-of-plumber who now wants to be a country western singer who, I presume, will croon about his sex life going down the drain due to lack of funds.
Unintended effect???? HAHAHAHA. When I was in the earlier hearings about the bail the gnomes out by buying them all yachts bill, everyone talked about all the things that are now going on. Everyone knew that the bill was going to allow a bunch of sex-crazed gnomes to raid the public till. There was talk about stopping this and having the bail out be strictly so that US people could pile more debt onto our homes and businesses.
Instead, it piled more loot into the bank vaults of a bunch of pirates. Was this unexpected? Well, back in September, I wrote about the funds given to both GOP and DNC members in Congress. It was a huge amount going to the regulators who have to please this army of well-heeled bribesters.
U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years.
*snip*
Critics, including economists and members of Congress, question why banks should get government money if they already have enough money to pay dividends -- or conversely, why banks that need government money are still spending so much on dividends.
The deal is, the rescuing entity will get dividends. See? So the government lends money at insanely low rates, not credit card rates, takes on ALL LOSSES and then, on top of this, guarantees all dividends of what are essentially bankrupt banks? HAHAHA. This is not a great way to get rich, incidentally. The dark arts of going bankrupt have, through history, been the only way to fix broken businesses or banks.
The tragedy of the Soviet State was, they couldn't let any businesses go bankrupt. So the entire nation went bankrupt. Not exactly a good outcome. I keep pointing out that the US is becoming the Soviet Union. These bail outs are obviously right in step with Soviet thinking. Torturing people,indefinite imprisonment,running gulags, limiting public protests, tasering peoplefor asking 'interesting questions,' throwing away the Constitution, concentrating power in the White House Kremlin clone, etc: we even are fighting a futile war with the very same Afghani groups that destroyed Soviet power!
And here is McCain and Palin claiming that Obama is a communist. HAHAHA. I wish he was a Chinese communist! They seem to know exactly what capitalism is! The present regime in DC is utterly clueless about what capitalism is or what banks are.
The government is in collusion with the people who destroyed not only our banking system but who conspired to turn traditional banking into a debt machine. A machine that has ground out endless red ink, red ink that is killing our nation and drowning the world with cheap dollars. Note how much I paid in rent for a two bedroom house, not apartment, with a yard and a place to park my truck!
The national “bank holiday” that ushered in the New Deal in 1933 locked up the public’s cash for four days. The crisis that hit last month at the Reserve Fund, the nation’s oldest money market fund, has frozen hundreds of thousands of customer accounts for more than six weeks — with no sure end in sight.
At least 400,000 people, and perhaps as many as a million, can’t get access to their savings, a problem that has quietly persisted in spite of widely publicized federal efforts to restore confidence in money-fund investments.
*snip*
And the Reserve Fund had seemed the least likely candidate for trouble, given its long and stable history — its founder, the legendary Henry B. R. Brown, had invented money market funds.
Initially, the company simply announced that it would delay redemptions from the Primary Fund for up to seven days, as allowed by law. Customers were somewhat reassured, but anyone trying to get additional information was met with busy phone lines and unanswered e-mail.
First, let's go to the web page of this ponzi scheme operation and look at two press releases:
The Board of Trustees of The Reserve Fund, after reviewing the unprecedented market events of the past several days and their impact on The Primary Fund, a series of The Reserve Fund and taking into account recommendations made by Reserve Management Company, Inc., the investment manager of The Primary Fund, approved the following actions with respect to The Primary Fund only:
The value of the debt securities issued by Lehman Brothers Holdings, Inc. (facevalue $785 million) and held by the Primary Fund has been valued at zero effective as of 4:00PM New York time today. As a result, the NAV of the Primary Fund, effective as of 4:00PM, is $0.97 per share. All redemption requests received prior to 3:00PMtoday will be redeemed at a net asset value of $1.00 per share.
Effective today and until further notice, the proceeds of redemptions from Primary Fund will not be transmitted to the redeeming investor for a period of up to seven calendar days after the redemption. The seven-day redemption delay will not apply to debit card transactions, ACH transactions or checks written against the assets of the Primary Fund provided that any such transaction from an investor, individually or in the aggregate, does not exceed $10,000.
The Primary Fund will continue to accept purchase orders.
Effective tomorrow, September 17, 2008, the NAV for the Primary Fund will be calculated once a day at 5:00PM, New York time.
Here is the death notice:
Many shareholders have contacted us regarding the status of their investments in Reserve funds. We hope the information below answers some of your questions.
Suspended Purchases:
We are not accepting subscriptions in any of the Reserve Funds.
Suspended Redemptions and Liquidating Funds:
The U.S. Securities and Exchange Commission (SEC) has issued temporary orders permitting the suspension of all rights of redemption for the following funds:
PRIMARY FUND U.S. GOVERNMENT FUND of the Reserve Fund
*INTERSTATE TAX-EXEMPT FUND* CALIFORNIA MUNICIPAL MONEY-MARKET FUND
* CONNECTICUT MUNICIPAL MONEY-MARKET FUND* FLORIDA MUNICIPAL MONEY-MARKET FUND* MICHIGAN MUNICIPAL MONEY-MARKET FUND
* NEW JERSEY MUNICIPAL MONEY-MARKET FUND
* OHIO MUNICIPAL MONEY-MARKET FUND* PENNSYLVANIA MUNICIPAL MONEY-MARKET FUND
* VIRGINIA MUNICIPAL MONEY-MARKET FUND of the Reserve Municipal Money-Market Trust II
* NEW YORK MUNICIPAL MONEY-MARKET FUND of the Reserve New York Municipal Money-Market Trust
* ARIZONA MUNICIPAL MONEY-MARKET FUND* MINNESOTA MUNICIPAL MONEY-MARKET FUND of the Reserve Municipal Money-Market Trust
* RESERVE YIELD PLUS FUND of the Reserve Short-Term Investment Trust
The Boards of Trustees (the “Boards”) are working on plans to effect the orderly liquidation of the foregoing funds, subject to supervision by the SEC. The Boards seek to ensure that all investors are treated fairly and receive their money in the shortest time consistent with realizing the fair value of the securities. The Reserve intends to begin making payouts as soon as practicable.
In other words, the fund is bankrupt. Note how it was cleverly named to make it sound like these government funds were bonds held by the Federal Reserve. This is a common problem. Bankers would name their banks after government entities like 'The Bank of New York' but they are really dangerous private enterprises. Not that they are really that anymore, anyway. Now that the bankers have raided the Treasury to get their bonuses and dividends!
Usually in a collapse, the first funds to tank are those which appeared the safest. This is yet another typical example. This, the oldest of the Funds which are destroying global savings and wealth, was slain by the Derivatives Beast. He ate the whole thing. When he ate Lehman Brothers, nothing was left, barely any bones!
These funds were quite ordinary. And thus, not all that profitable. When inflation raged ahead of the value of these instruments, the desperate fund managers wanted it to grow, anyway, so they played those stupid, useless and destructive credit default swap games. And interest rate flux games. And monetary values market games. And lost their shirts! This sort of hyper-risky activity is due to the dollar dying! And what is killing the dollar?
Hyperlending. Especially to governments. And the wildest borrower is Congress and the President of the US. The same people putting another trillion plus debt on top of the ten trillion mountain of debt we already owe.
The average hedge fund has lost more than 18 percent this year, according to the HFRX Global Hedge Fund Index. Managers are selling assets to meet demands from lenders for more collateral and investors that want their funds returned.
<p>
Investors forced to sell a record $2.3 billion of leveraged loans this month sent prices tumbling to a record low 66 cents on the dollar last week from 88.5 cents at the beginning of September, according to Standard & Poor's LCD, which earlier reported the Barclays loan sale. The sales were forced by clauses in funds' borrowing agreements that require them to raise money when prices drop below a set level.
In other words, the gnomes have to return the loot to the investors who want to run away as fast as humanly possible. When I rented my house for $68 a month, there were zero hedge funds in the universe. When the average American had to cough up $3,000 a month to rent homes, we had thousands of these hedge funds. There is a direct connection here.
Old banks were very parsimonious about lending for housing. The flood of debt that poured into all markets due to hedge funds funneling loans from 0% Bank of Japan to our markets has destroyed the value of the dollar. This is because the Japanese wanted to destroy the value of the yen so they could destroy our industrial base.
To keep the yen weak, the Bank of Japan had to make the carry trade flourish. Note how, when the yen got strong, the carry trade ended and LIQUIDITY VANISHED ACROSS THE PLANET! And all these funds have been caught in the wringer here. They are the funnel for these outrageous loans. The Bank of Japan didn't give a hoot how improvident the lending was, they lent to anyone.
It should occur to people that the Bank of Japan did this before! Like, a decade earlier. They cheerfully handed out loans all over the place and Japan's property and stock markets had a monumental bubble. Then, the Bank of Japan turned and did this to the entire planet. The US wasn't the only place that saw epic real estate and corporate debt hikes. The housing bubble was pretty much global.
Of course, the August indexes don't reflect the financial market meltdown that hit in September and severely restricted access to credit, according to Richard DeKaser, chief economist for National City Corp (NCC, Fortune 500). He believes the pace of price declines has picked up since then.
"There are two explanations for these steeper declines," he said, "neither of which are encouraging. One is that the difficulty in obtaining credit has further constricted demand. The second is that home sellers are finally capitulating on prices. They've been holding out for months, refusing to sell except at their prices. Now they're throwing in the towel."
*snip*
Much of that statistical trend is being driven by data from hard-hit western states like California. The California Association of Realtors reported last week that home sales volume jumped a whopping 97% in September compared with the same period a year ago. But the median price of an existing home has fallen 41%.
Like the huge Japanese bubble, all these bubbles are going flat the same way and at the same rate. The US led the pack only because we were showered with the most red ink in the past. Attempts at restarting lending under these circumstances is impossible. But fixing this is even more impossible if the Bank of Japan isn't punished for what they did!
PUNISHMENTS MATTER!!! For example, the other G7 could condemn the Bank of Japan and isolate it. Forbid all commerce with it until it is thoroughly reformed. This means, first shutting down all the pirate coves which were the places that took the carry trade loans and sent them to various countries to load up debts. The US public financed a great deal of our debts via inflating the value of our homes. So now, we are rapidly losing wealth. 0% loans on homes are not happening. Even as the Fed drops rates, house loans are going up, not down, the interest rate mountain. This is due to the simple fact that everyone sane expects future inflation from all the money creation.
Meanwhile, Libra resets her scales in a rather violent way. As we plainly see. The Derivatives Beast is doing an epic job of eating up credit. Unwittingly, the gnomes themselves birthed this monster. And they want us to slay it for them. And then resume the financial games they played with Japan.
For the past few years, the Inland Empire in Riverside County has been one of the fastest growing counties in the state - home to a major housing boom. But now the Inland Empire is pretty much the poster child for the foreclosure crisis. In the newer developments, house after house sits vacant - either up for auction, for sale by a bank or going for what’s called a “short sale” which is when the owner owes more than the house is worth.
SoCal Connected tracked down some surreal sights associated with the crisis - a company that specializes in removing whatever people leave behind in their foreclosed homes. The process is called a “trashout” - a term the company came up with because it perfectly describes what happens. Everything that’s left is dumped in a trailer and taken to the landfill.
Several things are important here and seldom talked about. One is, the US consumer has grossly over-consumed. The video above is most infuriating. I have scavenged all of my life. Dumpster diving is great sport! Rich or poor, I could never resist dumpster diving. Watching them simply throw away perfectly good, often new, stuff, is amazing. They couldn't get anyone to come and get it!
I am just aghast. The people living in mostly new houses here in this video went on massive decorating/buying sprees after going very deeply into debt, buying the house on easy credit. When they couldn't pay even TWO YEARS of this high-living, they hightailed out and leave nearly everything behind?
Another thing struck me: nearly all the stuff was new. This means, they probably had very little belongings when they moved. I have moved a number of times and each time, required a moving van after age 28 years old. The real estate boom of the Sub Prime years which were from 2004-2007 were not normal house buying years. This was the period whereby banks who forgot the real rules of banking, were anxious to hand out loans to total strangers who didn't have to prove income or even citizenship.
The Hispanic community of illegal aliens believed that if they owned big houses, they would be able to force the government to hand over citizenship even though they jumped the lines in, so to speak. They came illegally. Here is a New York Times graph that clearly shows how this worked:
Note first of all, both Black purchases of homes and general population purchases began a steep decline in 2004. And was NEGATIVE during the HEIGHT of the bubble! On the other hand, the flood of often illegal Hispanic buyers shot up that very same year! Everyone else was exiting the markets because housing was too expensive. Were Hispanics suddenly earning much more than the general population?
NO! But they happily took on epic levels of debt in the hopes of gaining citizenship. Whole real estate businesses were predicated on luring them into very expensive homes. Most sane people would take one look at the high future rates of the various lending tricks and shake their heads and hold onto their purses. But not illegal aliens seeking to prove they had roots!
In 2005, I published a story declaring the housing boom had peaked. And I was right except for this one sub-market of buyers. The very reckless buyers who interfaced with very reckless bankers who took cynical advantage of their weakness.
Dar ELaine,
Can you blame uneducated,hard working hispanic immigrants from wanting to live the "American Dream of homeownership?" Companies such as Delta funding had programs 1st time homebuyer,80 ltv,no ss#,no credit score needed. I closed numerous deals like this when I was taking advantage of the housing bubble. Any kind of loan could get done. Gutted apartments with no rentals in Bed-sty were being refinanced with NO INTERIOR PHOTOS by HSBC,Decision 1 unit. Up to 95% ltv with a 600 credit score, and STATED INCOME!!! Everyone in the mortgage industry knew in 2004 that we had a MASSIVE MASSIVE Nightmare in front of us. Yet no one tried to do sound loans because the yield spread premuim you recieved as compensation, rewarded you for selling the much much riskier loan. Its as if the Banks wanted this to Blow up horribly in the end. Iam convinced from being heavily involved in mortgages for 5 years, that this was all totally planned in advance. Every bank knew they were writing AWFUL loans, but they didnt care because they could securitize it and dump it in pension funds and foreigners laps. The price we will pay for this is the HYPERINFLATION of the dollar.
Posted by: ralph | October 30, 2008 at 11:37 AM
Fed rate nears zero, food price goes higher. That and the fact it causes the US dollar to lose it's 'value'.
Wheat Soars Most in 20 Years on Federal Reserve's Rate Decrease (Bloomberg)
http://tinyurl.com/5zpnac
Posted by: Blunt Force Trauma | October 30, 2008 at 12:07 PM
OK - Maybe economics is not really a voo-doo science, but lets all understand that economics is not a "hard science". So economics cannot help but be imbued by bias - particularly that oh so insidius "poltico-power-money-ego" bias bull. So the critical thing is to keep the economic relationships simple (do you hear Calvino?). Eight variables or fewer. You know: Supply and Demand. BALANCE.
I sure hope some of the currently existing banks can begin to appreciate the concept of "balance", but I doubt it. Don't worry - better ideas are waiting in the wings and these ideas will emerge. I have some ideas that I plan on documenting on several "batterybank" sites I have registered. Balance is key.
Peace,
Ken
batterybanks.info
Posted by: Buffalo Ken | October 30, 2008 at 12:16 PM
Right - for "money" to "work" there needs to be balance. If the balance ain't there, then the money won't work, and then, the "money-handlers" will be without a job.
Good riddance - we need some better hands, but of course, the current "money handlers" will demand all sorts of payment when they themselves are so bankrupt. Hypocrisy to the nth degree.
Peace,
Ken
Posted by: Buffalo Ken | October 30, 2008 at 12:39 PM
Elaine, thank you for all of your hard work. You amaze me on a daily basis with your output and research. Any chance of writing a basic primer on currency? Yen rising, dollar falling, yada yada... Your explanation of the carry trade was excellent and I get the gist of what China and Japan are doing ect. Any help is appreciated. Thanks...
Posted by: djcrow22 | October 30, 2008 at 12:51 PM
Here is a concern I have regarding "talk on the Internet". A vast sum of magnificent knowledge might be lost if this material is not printed out. What Elaine has done here could be a magnificent book of tremendous value for so many. A "publisher" ought make a proposal to Elaine to publlish the book "gratis" so to speak. Then, if there are profits, a portion should go to Elaine so that she can continue to improve her homestead. If I was a publisher, I would do this. The content here has value in my humble opinion.
Peace,
Ken
Posted by: Buffalo Ken | October 30, 2008 at 01:01 PM
AIG used billions from Fed but hasn't said for what (Int'l Herald Tribune)
Oh, I know...houses in the Hamptons, Panama, The Caymans and in Ecuador.
http://tinyurl.com/5s39ks
Russia, China sign landmark oil pipeline deal (Breibart)
"Hey, U.S. No oil for you!" - Oil Nazi
http://tinyurl.com/5tuaor
Posted by: Blunt Force Trauma | October 30, 2008 at 01:05 PM
Elaine , my apologies if this has already been covered, but;
interest rate swaps , derviatives, the vast bulk of the beast i made of these things. they sound innocuous, staid, what could be more boring. they are not connected to inflated assets etc.
But two things seem really anomalous'
- there are 376 ? trill of them 376 trill of anything is anomalous-
- 0% interset rates are pretty anomalous too.
there has got to be a story here.
Posted by: ziff house | October 30, 2008 at 01:08 PM
Never underestimate the bad guys, if they can succeed with this high dollar crap, it will lower the cost of those imports and dampen inflation.
With everybody singing the same tune about the markets, it sure looks like a bottom, chartwise this is not 29 and its setup for a big rally.
Posted by: ziff house | October 30, 2008 at 01:15 PM
Hey ziff,
are you part of ziff davis by chance?
If so, you could publish.
Peace,
Ken
Posted by: Buffalo Ken | October 30, 2008 at 01:18 PM
"Big rally" or "dead cats all about".
Place your bets!
Peace,
Ken
Posted by: Buffalo Ken | October 30, 2008 at 01:19 PM
Just as an aside, I one time pulled a long-time dead grey cat from Providence Rd. Threw the carcass out in a dumpster at the Providence Square apartments. That cat was nothing but skin and bones.
Peace,
Ken
Posted by: Buffalo Ken | October 30, 2008 at 01:21 PM
and speaking of numbers, 3 is so irrational - it all starts with three.
1/3
2/3
so on so forth.
But take the reciprocal and then it ain't irrational anymore.
Now the square root of 10. That is a whole nether matter. Knowledge is sacred moreso than just about anything else.
Peace,
Ken
Posted by: Buffalo Ken | October 30, 2008 at 01:24 PM
Redacting public contracts?
Bailout Scandal: Undisclosed Sums Paid to NY Mellon Bank (Washington Watch - Oct. 23rd)
http://tinyurl.com/6df7r9
More:
Bailout package: Blacked out provisions for compensation (Divining The News)
http://tinyurl.com/6jawce
Posted by: Blunt Force Trauma | October 30, 2008 at 01:24 PM
Bloomberg doublespeak alert!
U.S. Economy: GDP Shrinks at Fastest Pace Since 2001 (Bloomberg)
Then, in the next story, Bloomberg tells us that stocks 'rose' on GDP - even though it shrank - but less than expected, blah, blah, blah.
http://tinyurl.com/5kpxya
U.S. Stocks Gain on GDP, Rate Cuts; Intel, Home Depot Advance (Bloomberg)
http://tinyurl.com/5lb4um
Posted by: Blunt Force Trauma | October 30, 2008 at 01:40 PM
Hi Elaine,
I lived in Austin, Texas in the 80's when the previous real estate bubble went bust.
I was able to buy a house in a small town outside of Austin at the nadir of the the bust for less than $20,000. (At one time it had been under contract for $45,000 so it had theoretically fallen over 50% in value).
I worked for a realtor in that town from about 1993 to 1999. I was lucky, the realtor I worked for was one of the ethical ones.
I watched the early part of the bubble in central Texas. It was never as wild a ride as California or Florida, but it was definately a rising market, to the point where even today a house in Austin is out of reach for a lot of people who have good jobs (like cops and teachers).
Most people are not sophisticated enough to understand an asset bubble. A lot of them were on a treadmill with their income not even keeping up with inflation and rents on the rise. The lure of little or no money down to get ahold of a house before the price went inevitably out of reach didn't really look that crazy.
Of course this was BEFORE lenders went on a lending orgy to anyone with a pulse, so people weren't normally placed in propertied that they could not afford.
It was pretty standard practice (in the office I worked in) to send potential buyers to a reliable lender to get them "prequalified" for a loan and then help them shop within their means.
Since then I have bought and sold several houses (I'm NOT a flipper, it was relocation for my husbands work) and as a buyer I can tell you the lender I went with used due dilligence and required and perused all our financial information up to and including pay check stubs, bank statements, and IRS tax documents for the 2 preceding years.
Some people were imprudent and purchased beyond their means and were not weeded out by lenders, some were convinced to get in on ARMs that they didn't understand, and I am sure there was fraud as well. But the average person didn't see the "trap" because real estate was always going up and they were desperate get on the "property ladder" before the rung they could barely grasp was yanked forever beyond their reach.
Nobody was talking about the unsustainability of the price of real estate, it was all just up-up-and-away.
The underlying problem wasn't the sub-prime lending, it was the bubble created by too much cheap money chasing too few quality assets. This is the same phenomena I observed when my husband asked me to look into investing for his 401K. (My introduction to economics) When so called financial advisors were saying that P/E was unimportant because you were going to make money off of appreciation of your equity not earnings. (My first real SAY WHAT? moment.)
I have no economics training and didn't know a technical from a fundamental, but apparently training in economics nulls common sense. Even before I knew anything about derivatives and the gross distortions that they created I knew that a pattern of perpetual growth was immpossible.
The same dynamic that was blowing a bubble in the real estate market was working in the stock market.
The other side of the coin was the crack dream that real prosperity could be built out of a mountain of debt. Anybody with a lick of sense knows that a point is reached where debt will be defaulted on if it reaches the point where the debt is immpossible to repay. Debt cannot grow to the sky any more than real estate or the stock market.
When the bottom of the pyramid collapsed (the American consumer) the whole house of cards HAD to fall with it.
The whole derivatives scam and the carry trade were tools that to just keep blowing the bubble bigger and bigger, believing the whole time that the bubble would never burst, and in so will increase the carnage exponetially.
Posted by: PK Scott | October 30, 2008 at 01:56 PM
Hey Ken,
The Elliot Wave people think this is absolutely a dead cat bounce (maybe all the way back p to 10,000). They use some kind of fractal wave count stuff that is confusing to me but seem to get their calls pretty right.
The prediction is that after this one we get a bigg assed drop to around 5,000. Then maybe we get another bounce and a drop that may ultimately wind up below 1,000.
It sounds pretty dire, but the last depression wrung 95% out of the markets before they really hit bottom.
Posted by: PK Scott | October 30, 2008 at 02:05 PM
Politics at best: I was reading how the FDIC is going to bail out 3 million homes with 50 Billion, which is part of the 700 Billion plan. Meanwhile, I see no plan in place for the use of the capital that is still on the sidelines. From a political posturing, I still see this benefiting Obama, knowing that resolution is no-where in sight, the money will be released after Nov. 4th, knowing that Goldman Sachs former leader is in charge of the 700B cookie jar. Also, Delta Airlines/Northwest gets approval from DOJ for its merger, which only took 7 months !! We know that the democratic
base does not like airline mergers and the approval comes, just before the Election. Politics, never.......
Posted by: don | October 30, 2008 at 02:11 PM
In 1992, U.S. taxpayers paid the FED banking system $286 Billions in interest on debt the FED created out of thin air.
IOWs each of the 300 FED stockholders got a $24 Billion dollar dividend.
Today, each of those 300 FED stockholders gets a dividend closer to $100 Billions.
The FED's books are not open to the public. And Congress has yet to audit them.
Posted by: PLovering | October 30, 2008 at 02:15 PM
Hey Ziff, as far as I can tell EVERYONE is not singing the same tune. They are up down and sideways.
You are right though, it's NOT 1929, we are actually in lots worse shape from some perspectives.
Back then we weren't so dependant on just in time delivery and we weren't so dependant on energy. I'm not just talking oil here. Even in the 70's there were still a lot of people and animal powered machines/tools lying around. Have you priced a hand crank butter churn? If you can find one it's an antique and it will set you back over $100 dollars. How about a cream separator? Most of them are defunct and/or have been used as a planter. $150.00 minimum. A new one will set you back about $300.00. How about a non-electric washing machine. (grandma had one, you agitaded it by hand and wrung the clothes out with a hand crank wringer.) Ice box? Ice house? (Granpa worked through the dpression in an ICEHOUSE back when ice was delivered door to door and a necessity.)
My parents lived through the depression and they are the kind of people who re-used tin foil. My mom talks still talks about it. They were farmers, at least they ate.
The whole dollar thing is probably an anomaly. Chances are pretty good that it won't last. Remember every government on the planet is begging the banks to LEND. What happens if the floodgates open up again? Inquiring minds want to know.
Posted by: PK Scott | October 30, 2008 at 02:26 PM
Don said, "I was reading how the FDIC is going to bail out 3 million homes with 50 Billion..."
You're missing a zero :)
Treasury, FDIC Said to Consider Guarantees to Stem Foreclosures (Bloomberg)
"The U.S. Treasury and the Federal Deposit Insurance Corp. are considering a program that may offer about $500 billion in guarantees for troubled mortgages to stem record foreclosures, people familiar with the matter said."
Stem? You mean not 'stop' the foreclosures? So the sudden death heart attack instead becomes a slow flesh-eating disease? Well then. Sign me up!
http://tinyurl.com/68y85y
Posted by: Blunt Force Trauma | October 30, 2008 at 02:29 PM
....to add, Don. I don't see how any of the above 'benefits' Obama. No matter when the release date of the casino toilet paper is to be. People will still lose their homes - just a little slower.
Posted by: Blunt Force Trauma | October 30, 2008 at 02:33 PM
I don't really care about the large-scale market (the dow and others), cause they will go where they will. Its a casino after all.
But I do care about silver and I care about gold. Plus just a bit of platinum is nice too. If the Dow goes down to a thou, who is gonna suffer - not most. Most will just go about their day-to-day business and I am amongst them. I am one of the peasants and we don't need no stinking loans from the damn hypocritical banks - they can keep their fake paper money.
I gotta color-laser printer. Hells Bells, its been a printing.
Peace,
Ken
Posted by: Buffalo Ken | October 30, 2008 at 02:33 PM
And one last thing that I know....I have it so much better than so many peasants from the past....I know this. But still, I consider myself a peasant. I come from humble origins. Small house type folks.
Peace,
Ken
Posted by: Buffalo Ken | October 30, 2008 at 02:38 PM
Ken said:
"If the Dow goes down to a thou, who is gonna suffer - not most."
-Are you serious? The DOW as it is today, has throngs of the innocent that don't play the racket who are losing pension fund money as that money that was put into pension funds (portion of wages) has been packaged and gambled away on mortgages and other investment vehicles by those entrusted with sustaining those nest-eggs which are at best, half of what they were a year ago. The DOW has far-reaching effects. Don't kid yourself.
"Most will just go about their day-to-day business and I am amongst them."
-In the souplines and/or looking for work.
"I am one of the peasants and we don't need no stinking loans from the damn hypocritical banks - they can keep their fake paper money."
-Which we all need for day-to-day living, unfortunately, as we are told by them that it has 'value'. Also, unless you have countless (hundreds of) thousands saved, you'll need those loans for cars, houses and big ticket items. But with the squandering going on; good luck.
Posted by: Blunt Force Trauma | October 30, 2008 at 02:44 PM
Blunt Force Trauma - I just don't buy into the fear. Foolish maybe, but fearful not.
Peace,
Ken
Posted by: Buffalo Ken | October 30, 2008 at 02:47 PM
Plus - so many plants can grow back all by themselves. With modern no-how and ancient wisdom, the sky is the limit.
Peace,
Ken
Posted by: Buffalo Ken | October 30, 2008 at 02:48 PM
Lastly - if I had kept my funds is cash (US Dollars) I would have plenty more than I need to pay off all of my debts -- I suppose in hindsight this would have been the smartest being that my debts are also in US dollars (no uncertainty). But, to me the US Dollar is a dead end road, so I rolled the dice - so far it hasn't been profitable, but I don't really care cause my debt is very small.
Peace,
Ken
Posted by: Buffalo Ken | October 30, 2008 at 02:54 PM
It has nothing to do with fear, Ken. It's reality. The DOW affects 401(k), IRA and retirement plans. It's a loss in equity - liquidity for someone that has worked all their life. It also tends to be a barometer of the economy which means it 'measures' your ability to find another job or get a raise or just keeping your job.
The only 'fear' is that if you're close to retirement age, what is happening on the DOW greatly affects the above. it's why you'll see stories such as this one:
State's pension funds take $5B hit (Star Ledger)
http://tinyurl.com/628b2x
Ignoring that and the DOW IS foolish. Which you've already stated that you are. I have my moments as well. You're not alone :)
Posted by: Blunt Force Trauma | October 30, 2008 at 02:56 PM
Peasants know that sometimes they have to pick up and leave. Peasants know that they have the numbers. Peasants know what needs to be done when the time comes.
Peace,
Ken
Posted by: Buffalo Ken | October 30, 2008 at 02:56 PM
Blunt - I know I'm not alone. Nor are you.
Posted by: Buffalo Ken | October 30, 2008 at 02:57 PM
Here is a link of a Dennis Kucinich vid from the House Floor: http://www.youtube.com/watch?v=Feyu2Db2QuU . The Congress has too few like Kucinich. That's the problem.
Posted by: Paul S | October 30, 2008 at 03:07 PM
Hey Ken, gotta burst your balloon on gold. Sorry. Also remember, that is a 'crisis', as has happened before; the 'bastards' will confiscate your gold. Make sure it's physical and not bonds/paper and bury it next to the Oak tree behind the dog house :)
Reality Dawning...For Gold (Euro-Pacific Capital)
http://tinyurl.com/62m6yo
Posted by: Blunt Force Trauma | October 30, 2008 at 03:17 PM
I think our politicians have their fingers in the dyke. The you-know-what will hit the fan after the election. And: the low point of the election coverage from last night? Tom Delay being interviewed about Obama. Why have Delay on? Delay created and fostered the 'culture of corruption' in Washington. Delay left the House when he was indicted for violating finance laws. What next? Having Hustler publisher Larry Flynt on the air to plead for equal rights for women? Why not? That's no worse than interviewing the sleazeball from Texas, Delay.
Posted by: Paul S | October 30, 2008 at 03:20 PM
Wamu sent me an invitation to refinance my thirty year mortgage taken out in 2001. The letter was about one thing - getting my rate lowered! So I took the bait and called. I did not miss any payments with Wamu and did not pay late ever. They offered me 7.375%. That is much higher than my original rate. I agreed of course, because I know that Wamu needs the money and I want to help them make a 600 point spread. Not.
Posted by: calvino | October 30, 2008 at 03:21 PM
''With everybody singing the same tune ''
yes that was off the cuff, but the big howl in the press is a good bottom marker and i'll stick to my guns about the charts. Charts have a mystical power you know.
Ziff-davis? sorry no, i'm just a forest gnome.
Posted by: ziff house | October 30, 2008 at 03:22 PM
ziff-house - me too. I'm living in the forest, but I'm not a gnome.
calvino - I knew you were out there....600 point spread - you must be kidding. 500 maybe.
Peace,
Ken
Posted by: Buffalo Ken | October 30, 2008 at 03:30 PM
Awesome Gnome Video (Youtube)
-Well not really. Terrible quality, but it looks a lot like Benny to me.
http://tinyurl.com/3cv8t4
Posted by: Blunt Force Trauma | October 30, 2008 at 03:34 PM
Blunt: did you steal my zero..thanks.............
I was looking at the 700 billion that is being
guarded by Former Ceo Paulson and he gets to play sheriff with the money allocation. Keep the ugly numbers in play so it looks nasty and then release the money after Nov. 4th. Politics...............
I looked up the contributions for Obama and one of the biggest contributors is Goldman Sachs. That is the correlation I am making. Sure like to know what body of the govt. is protecting the main
street individual. I find none...........
Posted by: don | October 30, 2008 at 03:38 PM
The system is a mess which is really no surprise. Fractional lending and fiat currencies work for a relatively short time before they implode.
How can a system, that creates liquidity through loans, but never creates the interest to be paid ever be expected to work?
The loans and interest simply cannot be fully paid.
It's a scheme that works over and over again through-out the world. People are quite stupid to trust the economy to the elite scum. Those bastards make the mafia look like good fellas.
Elaine - I had a 1956 chevy in high school (1968-70). It was an ugly and rusty mess but in those days, if you had wheels, you were made. The bad looks were more than made up by the cherry bomb glass pack muffler, nice looking wheels and a really nice 8 ball shifter.
My front seat had a nice zebra cover, made me feel like I was in the jungle which somehow was appropriate.
Posted by: DrKrbyLuv | October 30, 2008 at 03:43 PM
Correction to previous post:
U.S. taxpayers paid the 300 FED shareholders a dividend of only $1 Billion each in 1992.
And a 4-5 $Billion dividend, each, today.
Sorry about the math.
Posted by: PLovering | October 30, 2008 at 03:53 PM
Don said:
"I looked up the contributions for Obama and one of the biggest contributors is Goldman Sachs."
You'll find Gollum and others at the top or near to it on most of the candidates' contribution lists.
Speaking of Gnomes...caught with their pants down I see!
Lies and Audiotape: Morgan Chase Exec Brags Bailout Is for Takeovers, Restructuring, Not Lending (EIR)
http://tinyurl.com/65dq83
Posted by: Blunt Force Trauma | October 30, 2008 at 03:57 PM
Wrong Buffalo. The Fed Funds overnight rate has been dropped to 1% yesterday. Wamu will be muzzling at that trough and regurgitating back to me at 7.375%. That is 600 points plus.
Posted by: calvino | October 30, 2008 at 04:03 PM
Bubble, Bubble: Unprecedented Bailouts and Loans from Fed
Oct. 25, 2008 (EIRNS)—The weekly Federal Reserve report on how much banks are borrowing from the bailout facilities, released Thursday, shows that banks borrowed this week at the highest rate on record. On Oct. 22 alone, banks borrowed $107.5 billion, which is an all-time high. The daily average for the week, from Thursday to Wednesday, was $105.8 billion a day. The previous all-time high was a daily average of $99.7 billion, the previous week. At the same time, over the last week, another $144.2 billion in loans were made to money market mutual funds. In a third category, investment banks, Goldman Sachs, Morgan Stanley, and Merrill Lynch borrowed another $111.3 billion for their London broker-dealer subsidiaries. Reporters at the White House briefing today tried to extract an answer from White House spokeswoman Dana Perrino about why such skyrocketing borrowing by banks "after" the Paulson Bailout. Perrino claimed that the $700 billion approved by Congress has not actually gotten to any banks yet--Paulson's team is still hiring "the right kind of consultants" to administer the bailout.
Posted by: Blunt Force Trauma | October 30, 2008 at 04:07 PM
Market Ticker has excellent post on recourse vs non-recourse loans.
New loans may be recourse loans, whereby the bank owns you for life.
http://market-ticker.denninger.net/
Posted by: PLovering | October 30, 2008 at 04:41 PM
"New loans may be recourse loans, whereby the bank owns you for life."
i.e. - Slaves, Serfdom
Posted by: Blunt Force Trauma | October 30, 2008 at 04:51 PM
Legion is back. Get behind me devil.
Posted by: calvino | October 30, 2008 at 04:55 PM
I descended from the Bardis. Yes, recourse loans will enslave you every bit as much as credit card loans. Note how the gnomes worked hard to make credit card loans hard to evade.
And thanks for all the links and comments. Things are moving fast. And I notice that Typepad restored my control of my HTML coding this last few hours. Damn them to hell for screwing with my site!
Posted by: Elaine Meinel Supkis | October 30, 2008 at 05:12 PM
KABOOM!
Fed Buys $145.7 Billion of Commercial Paper in Start of Program (Bloomberg)
'The Federal Reserve bought commercial paper valued at $145.7 billion in the first days of the program aimed at backstopping the market, indicating the central bank is generating most of this week's record gains in short-term corporate borrowing.'
-That's expensive toilet paper. Must be 10 ply, baby-powder scented.
http://tinyurl.com/5gln6m
Posted by: Blunt Force Trauma | October 30, 2008 at 05:48 PM
Senator Obama has said that he wants to expand the Small Business Administration so as to provide the financing that American startups require. Since investment bankers have failed abjectly to finance future growth and manufacturing, I like the Senator's proposal very much. I do not understand why the taxpayers need a skein of banker parasites that are failures in their role, whereby they kill the host. Several completely useless McMansions in exurbia is the difference between having the next Genentech or Fairchild Semi. I am completely disgusted with these preening cretins. Vote Obama.
Posted by: calvino | October 30, 2008 at 06:50 PM