ANTIESTABLISHMENTARIAN

Finance, Fuel Prices, Economics, Markets

Says It All

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Imagine that there were no stock market. If you wanted to buy a stock you simply went to a stock store and paid the par value of the stock.

If you can understand the problem with that, then you can understand the current problem with banks. They claim their assets are worth par when, in fact, everyone knows they’re more likely worth ten cents on the dollar.

The banks are up the creek, and we are up the creek because you, dear reader, are being forced to indemnify about two dozen sink holes. All of your assets, and all of your potential future earnings (which diminish on a daily basis), and those of your children, have been pledged to fill those holes. Holes that any sensible person knows cannot be filled. No matter how much money is poured into them, the money just disappears.

Residing at the bottom of the sink hole is the derivatives beast which has a limitless hunger. Its name is Washington.

Unfortunately, there are other sink holes besides banks. They have names like national debt, social security, medicare and many, many more that you don’t know about because Uncle Sam keeps multiple sets of book. If banks are sink holes, then these leviathans are black hole of cosmic proportions.

For years people have called me a doomsayer. Soon they may be calling me a master of understatement.

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February 27, 2009 Posted by | Blowing Steam, Uncategorized | Leave a comment

A Tsunami is Coming

Anyone remember Credit Default Swaps? They were a hot topic last fall and then suddenly dropped out of sight of the MSM, a media which appears to have both visual and audio problems. Anyway, the $50 trillion of CDS have not gone away; they remain hidden in the vaults of thousands of hedge funds.

Today we get word of another $750 billion bail out for the banks. Regular readers know that I constantly refer to banks as black holes and CDS are the reason why, as well as the reason for the endless parade of bail outs. $50 trillion dollars. To put this in perspective, it is estimated that the total wealth of the US is something like $71 trillion.

CDS is credit insurance, but unlike any other kind of insurance, you do not have to own the underlying asset to insure credit. If you think the ABC company is a lousy outfit and is likely to go broke, you can buy a CDS on its stinky bonds and if they default, you can get paid the whole value of those bonds. Imagine how many times this was done, and the huge moral hazard created by $50 trillion in CDS, and you have the whole picture of why no amount of money spent by the USG can resolve this situation with the banks. You see, I was not joking in calling them black holes. We could just as easily call them anti-money companies, for as soon as money comes near them, the money is destroyed.

Banks sold the CDS and hedge funds bought them. We do not know which banks hold how much and our lovely fascist government is not about to tell us, though they surely know. But lets take the top 17 banks which are in deep doo-doo, and the ones most likely to have sold this garbage. If we divvy it up equally, $50 T divided by 17 banks equals $3 trillion apiece. Of course, not all 17 sold equal amounts and probably a few sold none at all, so that leaves us with probably a dozen banks each holding multiple trillions. Does this begin to round out the scope of the disaster for you?

Next, let’s consider how much of that $50 Tn in insured debt is going to default. The fact is, there is little point in insuring high risk debt that is unlikely to default. How much CDS would you expect was written on Microsoft or Intel? If you said none, you’d probably be right. But what about General Motors, Ford, Chrysler and all the other shaky corporations? Well, there are more CDS written on GM than any other corporation. That fact should round out the picture for us of how bad this is. Fifty trillion written, not on the best risks but the worst.

This whole scene is like an extremely drunk driver driving a car. Sooner or later, an unexpected event will happen, or a serious mistake will be made, that sets off this ticking bomb.

Congress could pass a law nullifying these contracts. There is solid basis in law for their illegality to the extent that they defy the principle of insuring something one has no monetary interest in. It is statutorily illegal with any other kind of insurance. They will not do that by reason of campaign contributions from hedge funds. The rats in Washington, much like union members with their employers, would rather see the destruction of the nation than risk not being reelected.

And that is only part of the reason why I call this government fascist. A small part.

February 26, 2009 Posted by | Blowing Steam | , , , , , , , | 1 Comment

Elmer Gantry Does Washington

Anyone who has followed our new president’s pronouncements, during his less than two months in office, could only come to the conclusion that at best he is grossly inconsistent, or that he is flat out a snake oil salesman who takes most of his audience as a bunch of suckers.

For instances, he’s going to reduce the deficit by 50%, only weeks after announcing that there would be trillion dollar deficits for many years to come.

Or how about his “responsibility” nonsense, when the land is rife with massive banking frauds that continue to this day, and about which he will do nothing.

And then there was last night’s remarks about “not tolerating earmarks,” among many other whoppers. Is the big lie theory still operative? Probably yes, for his true believers, and certainly most of the Washington rat colony which considers anything emanating out of the heartland as mere background noise. Yet were they actually listening they’d be hearing a growing chorus of something far more than disenchantment. If they were actually listening, they’d be as frightened the big men in Beijing are.

Our great preacher-man mentioned the word “disenfranchisement” more than once. Such speeches are carefully crafted from psychological studies, and fucus ground, equally carefully crafted to placate. Its all so much bilge; it is already clear that it is not what he says that counts, but what he does. And that is the exact opposite of his eloquent words. Be wary of the silver-tongued serpent.

The markets rallied on Bernanke’s soothing words yesterday, a tribute to the desperation of the true believers. Of course, after sleeping on it, they got up this AM and promptly sold what they bought yesterday. At least the ones with half a brain left. The lies and deceptions coming out of Washington are now taking a very heavy toll on the markets. True believers are dropping off like leaves in autumn. For they know that 2/3rds of all lending in the US is extended by non banks by means of the debt bond markets that are now at ground zero. These markets are dead and buried, but the Vampires of Wall Street demand that the black holes created by the banksters be continuously fed with cash infusions, infusions that will be endless and without an ending.

The megabanks are insolvent so many times over that there is no hope for them. Black holes are less magnetic than those outfits. Neither can there be any hope for a nation whose leadership is determined to feed the remainder of its wealth into those holes. That they have been pouring good money after bad now for 18 months makes no impression on such elegant minds as the good doctors who are running the show. Ah, but these are ignorant or misinformed men, but corrupted men. And from the likes of them there can be no hope.

While nearly all students of the Great Depression agree that the main cause for its length and depth was the colossal mistakes that were made. But they are wrong: those were not mistakes, they were political calculations. The very same sort of calculations being made right now. The consequences for our future will be little different than the consequences of the past, for though the mills of the Gods grind slowly, they grind exceedingly fine.

Rats Can Be Funny

Doctor Bernake testified yesterday that the economy would begin to recover by the second quarter. I assume he meant this year, not 2020. Actually he wasn’t specific: probably giving himself a bit of wiggle room. Anyway, I swear I could hear outside this huge rumble of laughter, so loud and so deep it was as though it were coming from heaven.

I pay attention to the crap that pours out of the mouths of the Fed Chairman, Treasury Secretary and sometimes (lately) the president. Sometimes their evil ways are humorous, most often terrifically boring. All of them are incompetent and clueless, even as master manipulators. This becomes very clear when one reconciles all their day-to-day pronouncements into a cohesive whole. Of course, what one discovers is that there is no cohesion whatsoever. Rather, they are a chaotic jumble of disconnected ideas and consisting of little more than psychologically engineered propaganda. In the preceding essay, I illustrated Obama’s verbal thrashing around. He was on television this afternoon with even more policy contradictions. Little more than a month in office and he can’t even keep his “policies” straight. Hard to do when they are shot from the hip.

The United States as a whole is mostly insolvent, in debt up to its eyeballs and unable to service that debt. Our new president is getting a quick education in what it means to be broke, so he was forced to send Miss Hillary to Beijing to beg for more Chinese loans. Here is where it gets interesting as her return to the US marks the point of Mr. O’s sudden turn around on the spending scene.

There can be little doubt but that the Chinese made certain nonnegotiable demands for their continuing to roll over US debt. No imagination is required to guess what they were: Thou shalt do nothing to destroy the value of our US assets!!!. Is that clear enough? Does that explain why Mr. O is suddenly talking about responsibility and balancing budgets?

Equally interesting is what happened after the word was passed down the line. The whole nest of rats suddenly had a large cat appear, upsetting carefully devised plans to continue the monstrous spending spree. Bernanke and Geithner are reduced to inane babbling presented as high level plans. Virtually everything coming out of Washington is an unintelligible gibberish and doublespeak. Even the markets seem baffled by it all since they’re foolish enough to think that it all means something. It does, and they’ll catch on soon enough and realize that the whole pack of rats are all clueless. Of course, the true believers in the omnipotence of the Fed and USG have been kneeling at those alters so long that their knees have grown stiff. They are having a very hard time tearing themselves away from the alter, even though the church is on fire.

February 25, 2009 Posted by | Economics | , , , , , , | Leave a comment

How Far Down is Down?

Don’t take it from me but the Master of Socialist Capitalism, George Soros:

NEW YORK (Reuters) – Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.

Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.

He said the bankruptcy of Lehman Brothers in September marked a turning point in the functioning of the market system.

“We witnessed the collapse of the financial system,” Soros said at a Columbia University dinner. “It was placed on life support, and it’s still on life support. There’s no sign that we are anywhere near a bottom.”

Duh, no kidding? Next up is the idea that was too good to succeed, Global Free Trade which, despite the use of the word “free” has proved to be rather costly, both to those who profited and those who paid.

Those who talk about recovery either have something to sell or are whistling past the grave. Last week will mark the second phase and leg down of this collapse. We are witnessing the end of an empire, one of the shortest-lived in history. One had best start thinking about what the future will really look like. Clue: It won’t have anything to do with “Better Living Through Technology.”

February 22, 2009 Posted by | Economics | Leave a comment

Nationalization: A Dirty Word?

CitiGroup is a zombie, the walking dead, that is becoming a living nightmare. Citi is everything the Glass-Steagal Act of 1938 was designed to prevent. That and so much more, a pure horror show, for Citi is a $1.9 trillion dollar operation. For anyone who may think Citis is no big deal, let me put this into perspective, that is 1/7th of GDP!

Some of my readers have probably wondered why for more than a year I have predicted the demise of Citi. That is because by quirk of fate I have some knowledge of that outfit, having once been an investor and contractor to Traveller’s Insurance, which happens to be the nucleus that Citi was built around. Banking, Insurance, stock broker, prime dealer, hedge fund, you name it, Citi is the Las Vegas of the investment world and one of the world’s largest accidents waiting to happen.

Nationalization – the word has been bandied about lately as if it were a synonym for communism. The reality is that bank nationalization has a long history in the US, the most recent being the Savings and Loan debacle of 1985 when some 1500 S&L’s were forced into receivership – that last being the more commonly applied term than nationalization.

Readers may recall the Resolution Trust Corp. that was designed and implemented to handle the bankrupt S&Ls and wonder why this hasn’t been repeated. The answer is partly because it was not needed and partly unwanted.

Before people get all bent out of shape about that word, they should ask themselves what should be done if not nationalization? Just let it collapse? We saw the results of the Lehman collapse; Citi would be Lehman times ten. The resulting losses to depositors and various other customers would be horrific, but most of that loss would still fall on the taxpayer via the FDIC and other guaranty arrangements. And think of the chaos caused by the stoppage of banking operations such as credit cards, mutual funds, 401K & IRA accounts and such. The list goes on and on. You get the point; letting Citi collapse is quite simply not an option any more than ignoring Osama bin Laden was.

Yeah, nationalization stinks, but that is because Citi stinks and guess who is/was one of its biggest honchos? Yep, Sir Robert Rubin of Treasury Secretary fame. Not a Bushy but a Clintonite and buddy -buddy with all the ex Clintonites now repopulating Washington. He was one of those guys who was the power behind the throne, taking on no big title for himself mainly so he could bolt and avoid responsibility when the shit hit the fan. And that is exactly what Sir Robert Rubin has done, bolted. The man should be arrested and charged with everything a prosecutor can think of. He is a white collar criminal, pure and simple, part of the Jewish Mafia, worse than the likes of Bernie Madoff because he used the government to conceal his crimes.

The government has a huge problem with Citi; how does it take over and shut down the world’s largest such operation, as it has neither the expertise nor the capacity to do so. It needs to move slowly and with great caution, and is rightfully reluctant to do so. Citi’s stock fell to as low as $1.50 on Friday, so time is running out and can be measured in days. And wonder of wonders, American’s second largest bank, Bank of America is right on its heels.

The next couple weeks are likely to be very interesting, indeed.

February 22, 2009 Posted by | Uncategorized | , , , , , | Leave a comment

Crisis of Confidence Brewing

All that is needed to bring the whole of the US economy comletely down is for a crisis of confidence to develop on top of the financial crisis. Yet that is exactly what is happening. Here’s why:

Trillion dollar bail out of Wall Street Banks. Result: nothing.

Proposed second round of bank bail outs

Failure to deal with derivatives CDS & CDO

Failure to deal with toxic assets

Bailouts of Fanny & Freddy, done mainly to placate foreigners like the Chinese

The Madoff Ponzi scheme

The Stanford Ponzi scheme

Politicians that took huge amounts of money from both these men

The Obama bail out of dead beat homeowners, taking money from those who do pay their mortgages and giving to those who don’t. Rewarding bad decisions.

Widespread government abrogation of contracts

Bank executive bonuses paid out of bail out money

Extravagant parties held after receiving bail outs

Failure to prosecute banks for their fraudulent mortgage bond schemes

The failure of the Fed and Treasury and SEC to do anything about the massive and dangerous derivatives bubble.

The total failure of the SEC to regulate any of the massive frauds, collusions and market rigging, including criminal naked short trading, in any of the markets.

And today it is revealed that there is no evidence that Madoff ever purchased ANY securities for his thousands of customers for THIRTEEN YEARS. Madoff did not even make a pretense at investing in stocks!!! In other words, this fraud was hanging there right out in the open for decades. This revelation tops off the fact that the government flat out refused to investigate the dozens of complaints and warnings about both Madoff and Standford. What this reveals is that the SEC and other government agencies aided and abetted these crimes, making of government itself a criminal organization.

This list of malfeasance, incompetence, criminality and endless lying by government goes on unabated. A new president promising change delivers only more of the same. The media aids and abets the criminal class; what is passed off as news is mainly sick entertainment. A crisis of confidence is about to become full blown.

The stocks of the largest banks in the world are now penny stocks, on the edge of becoming worthless. They have not disclosed their toxic assets, leaving the market to assume that there is a lot more of it than admitted. The same applies to credit default swaps, the issuers of which have no reserves to pay losses. Fraudulent corporate bookkeeping is well documented.

After the first bail outs, Fanny and Freddy, are back for more after being directed by congress to continue making subprime loans. But guess what? Foreigners now refuse to buy their rotten paper. They are now at risk of a collapse in GSE mortgage backed securities. If that happens, the housing market will collapse to zero.

The banking system went through a meltdown last fall and was bailed out. It’s now at risk of entering the final meltdown that could, in one fell swoop, wipe out all 15 mega banks literally overnight. This is all due to a government that is in collusion with the bank gangsters to cover up their losses, and try to pretend that everything will be all right.

On February 12th, the president stated that his treasury secretary would unveil the full plans to save the banking system. The very next day, Geithener put forth nothing but glib generalities. Why? Undoubtedly because they know very well that it has gone beyond saving. There isn’t a chance in hell that the trillions of current losses, plus all the future losses that will be caused by a burgeoning depression, can be raised to cover those losses. The current numbers bandied about are $1.6 to $2 trillion; the reality is probably more like $10 trillion, or very close to an entire year’s GDP.

And for some strange reason the government thinks it can borrow endless amounts of money to bail out and paper over the catastrophe it created. The markets know better. It matters not whether they try to borrow or simply print the money, either way, reality rears its ugly head to say NO WAY!

All of the above can only leave investors to assume that the US is basically insolvent and untrustworthy of telling the truth. Who in their right mind would invest their money in these circumstances? The markets are increasingly answering, NO ONE.

Today Citigroup fell to $1.61 and Bank of America $2.53. One should not be surprised if they are nationalized over this weekend. Nether should one be surprised at a second round of financial collapse.

February 20, 2009 Posted by | Economics | Leave a comment

Unwanted Citizens

In the news today:

Microsoft fires 5,000 American workers and then applies for visas for foreigners to replace them, thereby taking “outsourcing” to a new level. No borders and floods of illegals is bad enough.

Its is now abundantly clear that neither Government nor corporate America gives a damn about the people of this nation, creating the kind of conditions that lead to insurrection and revolution. When large numbers of people no longer have anything left to loose, a nation rapidly becomes a tinderbox awaiting a spark to set them off. As a child of the sixties, I’ve seen this before and I would warn the powers that be that they are setting up the conditions for their own violent demise.

The middle class is being raped, robbed and pillaged. Watch out if the auto companies are allowed to go bust for want of a pocket change bailout after handing out a trillion or more to the Wall Street Mafia.

February 20, 2009 Posted by | Uncategorized | , , , | Leave a comment

Bancocracy

Bill Moyers, whom I destest, did an interview with Simon Johnson, former chief economist for the IMF. He, Johnson, is one of the first establishment insiders to come out and say the obvious, that our nation has been hijacked by gangster bankers.

” . . . it’s a small group with a lot of power. A lot of wealth. They don’t necessarily – they’re not necessarily always the names, the household names that spring to mind, in this kind of context. But they are the people who could pull the strings. Who have the influence. Who call the shots…

But it really shows you the arrogance [the bonuses], and I think these people think that they’ve won. They think it’s over. They think it’s won. They think that we’re going to pay out ten or 20 percent of GDP to basically make them whole. It’s astonishing….

…these people are throughout the system of government. They are very much at the forefront of the Treasury. The Treasury is apparently calling the shots on their economic policies. This is a decisive moment. Either you break the power or we’re stuck for a long time with this arrangement.”

A mere fifteen mega banks are literally holding the nation hostage, mostly by means of purchasing the protection of congress and anyone and anything else of importance to them. Their own people infiltrated and occupy every level of government, right up to the highest levels. There are none but the moneyman insiders who sit behind the president and give advice, including a raft of former Fed people. Former? Huh. Anyone who’s been paying the least attention probably finds it hard to tell where Goldman Sachs ends and the U.S. Government begins.

In case you might be wondering what kind of government we now have, the correct term is plutocracy – government by rich, powerful elites. The word is Greek with a literal translation of rule by wealth, so the definition fits only loosely. Apparently there is no fancy term for rule by bankers, but I suppose we could invent one and name it bancocracy.

The Japanese have a word for this that many are familiar with: keiretsu. Technically it means “business association” but the reality of it is that of a conspiratorial cartel, made up largely of the banks and auto companies. In Japan this cartel of big business literally owns and runs the nation under a one party system. It has often been referred to as Japan, Inc.

In the U.S. however, the ruling cartel is one of bankers , moneymen and the media entirely to the exclusion of productive industry which they apparently hate, and have long sought to get rid of. Their goal is to establish complete and total control over money and its movements by creating systems that attach fees to all money movement. They’d like nothing better than to see the elimination of cash altogether and establish credit accounts for the entire population. In this way they not only hold the government hostage, but the population as well.

These are supposed to be very smart men. But not smart enough to understand that when their actions destroy nations and lives, there is a very heavy price to be paid, and most often it is with their own lives.

February 15, 2009 Posted by | Blowing Steam | , , , | Leave a comment

Depression?

The IMF recently made a statement that got quite a bit of attention. It said that most G-7 nations are already in depression. That surprised me.

Actually, there is no “official” definition of depression though a survey of economists revealed that the majority thought it was a GDP downturn of at least 10% . Historically, these things have not been defined by periods of time since at least one US depression lasted only two years.

Therefore, we are definitely not in a depression yet as the GDP is nowhere near -10%.  Unfortunately, it is headed in that direction at a very rapid pace, thereby keeping my prediction of two years ago on track. At the present rate of decline we should be there in the forth quarter ’09.

From the Ministry of Truth, Confidence and Positive Thinking: The media is full of reports today that China’s economy is “showing signs” of a turnaround.  Horsefeathers! That economy is in a near free-fall.

February 13, 2009 Posted by | Economics | Leave a comment

People Say “NO!” to More Debt

A typically idiotic article by Bloomberg today tells about banks having a hard time getting people to borrow money. It tells of one bank that holds “town hall meetings” trying to get people to borrow. The people come, listen, and say “nyet! No more debt.”

Brilliant piece of journalism there. Most people, once getting burned by too much debt, and suffering greatly as a result, learn their lesson and don’t do it again. Of course media and government are now essentially one and the same in this plutocracy, so they are naturally perplexed. Economics is not their strong point, as the rash of bankruptcies in their industry might suggest.

This leads straight to Tiny Tim’s great new Trillion Dollar Giveaway Jackpot; actually two million is on the counter, one of which is earmarked to “stimulate” consumer borrowing of all types. It is doomed to total failure but this so-called genius hasn’t the intelligence to see that. Actually, I’m sure he knows this very well but his masters have issued their instructions. No doubt Mr. Timmy will be soon regretting his decision to take his new job, as it will soon become crystal clear (even to the genius) that he has been pushed out front as the fall guy for Mr. O.

It is simply impossible to stimulate an economy up to its eyeballs in debt with more credit offered by a government that itself is on the verg of financial collapse. As wise analysts have stated a million or more times, what we need are more savings, lower living standards, and a return to production of things of value. Not more money for kids to go to college to learn how to try to squeeze money out of pieces of paper. Paper is passé, nobody wants it anymore; its not saleable, just ask the banks since they’re holding trillions of the worthless stuff.

UPDATE: After Tiny Tim’s debacle performance yesterday unveiling a “Plan” that was no plan at all, this afternoon he returns for a reprise, a $50,000,000,000 giveaway to deadbeat homeowners who financed houses they couldn’t afford. This money doesn’t go to the deadbeat homeowner, but straight to the deadbeat banksters. This will be very helpful in stimulating more lending to people who don’t want to borrow any more, or to those who will take it knowing full well they won’t pay it back.

It is a very interesting proposition that the government will take the money out of the pockets of the very people they are trying to save, and transfer it to certain chosen political preferences. “Hark! I shall save you by robbing your future.”

The U.S. is a really great country . . . . so long as you’re on the right side of the scam.

February 12, 2009 Posted by | Daily Brief | Leave a comment