ANTIESTABLISHMENTARIAN

Finance, Fuel Prices, Economics, Markets

Default is the Answer

The question is, how do we get out of this mess? The truth is, we won’t. Political expediency will lead it where it has always led.

There will be no recovery of the U.S. economy because of the pervasive belief in the free lunch theory of economics that has led us down the same road as Japan. Let’s consider that nation, like the United States once considered an economic powerhouse. Just this week it was announced that Korean automaker Hyundai has exceeded Toyota in auto sales. Japan’s once invinceable car makers are now on the ropes and hurting badly as China gears up to take over from the fallen giant.

The Japanese economy collapsed in 1989 due to an enormous real estate bubble financed by excessive credit fostered by its central bank. Sound familiar? In 1990 the Nikkei reached an all-time high of 39,000; today, twenty years later it sits 75% lower right at 10,000. Japan has been in recession/depression for two whole decades, and the reason why is that the massive defaults from its collapsing markets were never recognized, never written off. They were carried on the books by the banks as good loans all these years when, in fact, the loans were not being repaid.

Why did they do this? Because they thought they could cheat the laws of math, have their cake and eat it too, and cover up the losses of dead banks indefinitely and they’d somehow miraculous resurrect themselves. The laws of math can’t be cheated any more than you can sit on fire and not be burned.

This is the same “solution” adopted by Barrack Husein Obama and his merry band of theives occupying the White House, as well as his predecessor. In addition to throwing a couple trillion of borrowed and printed money at the now bankrupt banks, they determined to sweep all the bad debts under the rug by changing the accounting rules so that banks could keep bad loans on the books as good loans. By the numbers, this makes the banks look solvent when, in fact, they are not.

As most readers know, the banks are not really lending, other than to hedge funds to speculate in the stock markets. The money lent by the Fed to the banks to keep them afloat was itself a new form of Ponzi Scheme. I apologize for the overuse of that term, but a rose by any other name . . . . . anyway, the money lent to the banks was for the purpose of the banks buying Treasury bonds since Uncle Sam was in acute danger of not being able to borrow nearly infinite amounts of money, so Bernanke & Friends cooked up this scheme, whereby the banks could deposit those bonds at the Fed as “excess reserves” on which the Fed would pay interest. As of May 2009, excess bank reserves totaled $840 billion; today they stand at $1.064 trillion and growing. But the banksters still are not lending despite the highest recorded reserve ratios in history. Why not?

Well, for one thing the banks are not really solvent due all those bad loans they carry on the books, and secondly there are no longer many credit worthy entities they would like to lend to. For some odd reason, the banksters suddenly became very prudent about lending. Apparently being broke has that effect on some people!

The banks are in this position because they have been insanely pushing credit down everyone’s throat with goading of our government in order to keep the Ponzi scheme economy going. A debt based money system is one that requires endless and infinite credit growth. Of course the flip side of credit growth is debt growth and only an idiot would think that debt could grow forever without disastrous consequences. This, naturally, has a lot to say about the general intelligence and integrity level of banking and politics. To wit, there is none.

Without bank lending, credit is shrinking dramatically; money is created by credit, so when credit shrinks, so does money supply. In saner times this is known as deflation, but that is a devil word not to be spoken by righteous men. So, when credit shrinks, the economy does likewise. To repeat, there are two reasons why the economy will remain trapped in depression. The first is bankrupt banks with trillions of bad loans on the books; the second is a populace that is hopelessly in debt and cannot repay those loans, or at least a too large percentage of them cannot. Ultimately, the bad debts on bank books will grow and grow, and loans will increasingly not be made, businesses will be starved for capital in an environment where the consumers are retrenching anyway, and on and on it will go just like Japan continues to do. Like flushing the toilet, it all spirals down the tubes.

There is yet a third element to the US situation that Japan does not have, which is the U.S. dollar as world currency. Like Japan, the US will try to bail itself out of this viscous circle by government stimulus . . . . borrowing and printing ever more money. The hope here is that inflation will erode away much of the debt overload. Unfortunately, this will not work because the end result will not be price inflation but dollar depreciation that ultimately must result in an international currency crisis and the death of the dollar, which will amount to the same thing as inflation, only in this case will be hyperinflation as the dollar looses upwards of 75% of its value. And when that transpires, any notion of the government engaging in deficit spending comes to a sudden end.

There is virtually nothing the government can do to fix the economy, any more that Bernie Madoff could extricate himself from his scheme; they can only succeed in making it worse. They merely rearrange the deck chairs on the Titanic while goading the band to play louder.

October 23, 2009 Posted by | Uncategorized | Leave a comment

CitiBank Loan Sharks

Citibank sent out letters this week notifying credit card holders that they were raising their interest rate to 30% (I exaggerate, its really only 29.99%, aren’t they clever?). Citi has 92 million card accounts outstanding. Never mind that this violates usury laws of most states, there is no enforcement of federal laws except when people attack the government.

The average cardholder was paying $3,600/yr in interest but will now be paying over $5,200 in interest. The net effects of this are obvious. First, people will cease spending via credit. Secondly, increasing the interest rate by 50% will remove that much more from consumer spending even by cash. Both consumers and retailers will take a big slap in the face from Citi.

In raw dollar terms, this means $113 billion in less disposable income exclusive of lost credit purchasing. [1]

I would be remiss if I didn’t point out that Citi is a ward of the taxpayers, partly owned by government, so folks, it is your dear government, directed by Saint Obama, who is giving you the royal shaft. Economic recovery? Who the hell do they think they’re kidding!

Welcome to government of the banks, by the banks and for the banks. The rest of you can go pound salt.

[1] Data obtained from Market Ticker

October 23, 2009 Posted by | Daily Brief | Leave a comment

Pick Pockets

LONDON, WSJ — This could end up being viewed as the week when dollar weakness became too much for the rest of the world to bear, setting the scene for tense encounters at the upcoming meeting of finance ministers from the world’s 20 largest economies.

So what does one do to make the  dollar rise in value? Well, one way is to remove a lot of them from circulation right at a time when “they” are trying to stimulate the economy. So raise interest rates and watch the dollar soar . . . and also watch the economy collapse, and with it US imports from those nations that are complaining so loud. So they want the US to go into a double-down depression and take the rest of the world with it? Huh, is that what they want, because that’s what they’ll get.

Oddly enough this article never once mentions China which, after Japan, is most responsible for kiting the dollar for years to facilitate their export machine. But THEIR Ponzi scheme has collapsed and now they’re looking for a scapegoat. China has the power to stop the descent of the dollar simply be removing their currency’s peg to the dollar and letting the Wan rise. Oh, no, they’re not about to do that since that would tank what’s left of their export machine.

This is what happens when governments take control of economies. It always has a very bad ending and its always the little people’s pockets that get picked clean.

That article is about as monitarily illiterate as one can get. Just goes to show what Rupert Murdock can do when he puts his mind to something. I canceled my WSJ subscription months ago. No point in paying for propaganda mixed with stupidity.

October 22, 2009 Posted by | Daily Brief | Leave a comment

Gangster Banks Refuse to be Regulated

There is not only no hope that our economy will recover unless that criminal mafia know as banks are reigned in with a bull whip, but even no hope that it will not continue to sink into severe regression and depression.

Congress has proposed some very weak new regulations for banks, but as soon as the gangsters heard about it they sent out howls of protest, saying no way, forget about it. And congress did. They bowed to the mafia bosses because the dons of Wall Street simply threaten to cut off the money those rats called congressmen need to gain re-election. Ergo, whatever Wall Street wants, Wall Street gets.

The economy cannot recover because innumerable bankrupt enterprises are being kept afloat with borrowed money. The massive amounts of debt we have accumulated quite simply drains the economy of necessary capital to keep it prospering. With the USG pulling $2 trillion of capital out of the economy every year, and hundreds of billions being paid out to foreign entities to service that debt, the economy is denuded of necessary capital. We have now reached the point that instead of productive enterprise, the number one money-making enterprise in this nation is speculating in financial markets. The insolvent zombie banks are surviving by borrowing from the Fed at zero percent interest and plunking it down into every speculative gamble imaginable. For example, it is reported that 20% of Goldman Sachs revenue last quarter was from speculating in US Treasury bonds alone.

The ten largest “banks” account for 40% of all stock market trades. They don’t do much lending anymore since there are few credit worthy entities left that wish to borrow, so despite the lowest interest rates in history, credit continues to collapse. Greenshoots? I won’t even bother to dignify that horse hockey. The consumer is finally starting to roll over and play dead as the banks have slashed consumer credit and hiked interest rates to levels that would make Joe Gambino blush. It will certainly stimulate the economy to gouge credit card accounts with 30% rates. Banks can rent money for 0.025% and charge 30% and above, a spread of 29.975 or better. Positively stimulating.

So with real unemployment approaching 20% and rising by a half million or better per month (and those are only the one’s they deign to count), with consumer credit being slashed, with wages and salaries on the decline, with the US dollar collapsing, which causes the price of all imports to rise, what are we then to say about the 70% consumer economy, that it is recovering? Sure, and you might as well claim that gold coins are falling from the sky.

The only way the US economy would be able to recover would be to seize the top ten banks and liquidate them, since they are technically insolvent anyway. All those trillions in worthless mortgages need to be purged from the system. Pretending that they don’t exist is what Japan did and put them into a 20 year depression that is now getting worse. The US is following that path precisely, yet the results will not be the same, the results will be far worse because the yen is not the world currency. And when the US dollar is repudiated, even Walmart will look like a luxury retailer. If, that is, there is still a Walmart left to sell Chinese goods no American could afford to buy.

The gangster bankers hold this nation in their iron grip and are milking it dry, just as Thomas Jefferson and Andrew Jackson said they would if control of money were turned over to them. It was as predictable as the sun rising.

October 17, 2009 Posted by | Economics | , , , , , , , , , , , | Leave a comment

Oil Again

Oil closed at 83 cents short of $80.00 today setting the highest price of the year. So what’s going on, are the speculators driving it up again, are there looming shortages, shrinking supply?

No, none of the above. The rising oil price is simply a function of the falling dollar, although I’ve seen quite a few “analysts” provide all sorts of reasons from peak oil to that grand bogyman, Goldman Sachs. Oil is priced in dollars, so when the dollar falls, the price of oil rises proportionately.

I am expecting both to level off soon. The fate of the dollar charted below.usdx

October 16, 2009 Posted by | Oil Updates | Leave a comment

How Our Economy Works

This is how the “recovery” is engineered,

Oct. 14 (Bloomberg) — Some of Treasury Secretary Timothy Geithner’s closest aides, none of whom faced Senate confirmation, earned millions of dollars a year working for Goldman Sachs Group Inc., Citigroup Inc. and other Wall Street firms, according to financial disclosure forms.

The advisers include Gene Sperling, who last year took in $887,727 from Goldman Sachs and $158,000 for speeches mostly to financial companies, including the firm run by accused Ponzi scheme mastermind R. Allen Stanford. Another top aide, Lee Sachs, reported more than $3 million in salary and partnership income from Mariner Investment Group, a New York hedge fund.

As part of Geithner’s kitchen cabinet, Sperling and Sachs wield influence behind the scenes at the Treasury Department, where they help oversee the $700 billion banking rescue and craft executive pay rules and the revamp of financial regulations.

The way to get ahead in this nation is to go to Washington with buckets of cash and buy whatever you need to ensure success. The rest of you can go pound salt. The place to be is in banking where success is guaranteed by the power of the U.S. government at all costs. If you don’t like the numbers, just change them and all will be well. Remember that at tax time.

October 14, 2009 Posted by | Blowing Steam | Leave a comment

UN Attacks the Dollar

If you’re wondering why I have been posting infrequently, it is because I am constantly getting locked out of my own blog. And I just don’t have the time to t ry to figure out why this keeps happening. Then, all of a sudden, without explanation, it starts working again.

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The UN is once again calling for a new “reserve currency,” only this time they have a plan. They want it to be IMF special drawing rights. Now, if you know what SDR’s are, then you know that it is the equivalent of PayPal, which is not a currency. Here is the description of SDR’s right from the horse’s mouth:

The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first, through the arrangement of voluntary exchanges between members; and second, by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. In addition to its role as a supplementary reserve asset, the SDR, serves as the unit of account of the IMF and some other international organizations. (See? PayPal :lol: )

Now, if you can make any sense out of that, you are pretty damn smart. Actually, its a defunct system that attempted to prevent the drain of gold from national treasuries; it didn’t work. The way its devised today is basically the “basket of currencies” approach. Its used for such obscure things as international settlement of postal accounts between nations. Sexy, huh? And can you see more than $3 trillion per day in transactions going through that system? Not a snowball’s chance in hell.

A major problem with “basket of currencies” idea is that it further removes penalties for monetary mismanagement as a result of concealing individual values in averages. It has all the negative attributes of socialism. If nations are monetarily irresponsible now, this will make them even more so. Moreover, it will concentrate power in the hands of who ever ends up controlling this system. For ultimately somebody has to make critical value decisions, decisions that today are made by a fairly free market.

What would ultimately happen is that every nation who’s currency was part of that basket of averages, would end up going hog wild in printing money because the inflationary effects would be protected or muted by that basket of averages, but the whole freaking basket would go right to hell in the proverbial hand basket. Try putting brain in gear before mouth in motion.

The reason why this is NOT going to happen is that the faults of such a system are painfully obvious and when push comes to shove ( and there will surely be a lot of that), nobody will want to take a chance on it. The current system is subject to Churchill’s comment about democracy: its a terrible system and the only good thing about is that every other system is worse.

If people don’t like the dollar, they should stop trading in it, but they don’t. Why? Because they don’t trust any other currencies either, so they prefer the devil they know over the ones they don’t. They DO trust the degree of transparency from the Fed, but they surely would NOT trust the ECB nor Beijing, nor Tokyo because they have NO transparency, so they bitch and moan, make a lot of noise and complain, but in the end they will not move away from the dollar.

Nobody is forcing China to accept payment in dollars. So why do they? If you can answer that question, you’ll understand why I say China is now in deep doo-doo.

October 7, 2009 Posted by | Uncategorized | , , , , | Leave a comment

Newspeak & The Minstry of Truth

Oct. 1 (Bloomberg) — The number of Americans filing first-time claims for jobless benefits rose more than forecast last week, a sign companies are still cutting workers as the economy pulls out of the recession.

Applications rose by 17,000 to 551,000 in the week ended Sept. 26, from a revised 534,000 the week before, Labor Department data showed today in Washington. The total number of people collecting unemployment insurance fell in the prior week to 6.09 million, the least since April.

And just yesterday they were telling us that jobless claims were falling. (CNBC, September 30th)

Reuters, 10/1/09  – September US Auto sales  off 47.2% yoy.

“As the economy pulls out of recession.”  Uh huh, sure, right. No lie is ever too large to tell.

“The economy is on track for a jobless recovery and unemployment will likely remain high well into next year,” said Sal Guatieri, a senior economist at BMO Capital Markets.  Never mind who this man is, this kind of crap is flooding all media of late.

They are making it very clear that a “recovery” is the very same thing as the bottom of a recession. Thirty million people without jobs is recovered, good, all is well, getting better. The lying just becomes increasingly insane.

Its interesting, too, how they take us for total blithering idiots, as if we can’t see the contradiction in the term “jobless recovery. Either that or far too many Americans have become blithering idiots that they will swallow such crap without a peep.

October 1, 2009 Posted by | Uncategorized | , , , | Leave a comment