Finance, Fuel Prices, Economics, Markets

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

How and Why

When somebody can say something better than you can, its best to defer. Here’s a quote from Elaine Supkis that I couldn’t possibly improve upon.

One thing is absolutely certain: the systematic looting of the lower working classes is a harbinger of economic collapse. When the working class is reduced to penury and hounded into being in debt more than a year’s wages, they lose economic power and an entire sector of a civilization vanishes as the working class no longer can participate in markets. Then, the destruction spreads to the middle class that needs the financial flows from the working class, to survive. Eventually, there is a huge spread between the elites and the rest of a civilization and it falls, often, very rapidly.

The ruling elites, if they wish to survive, must keep the working class capitalized. The minute they set into motion, a system whereby the working class no longer saves but instead, accumulates debts, we are on the downside of a civilization’s growth cycle.

The problem with truth is that it has a bad habit of sounding like, well, the truth!

June 24, 2009 Posted by | Daily Brief | Leave a comment

Withered & Died

Even Joe Sixpack don’t see no green in dem shoots.

ABC 6.23.09

Consumer confidence back on the elevator to the basement. Nothing like being raise up only to get smashed down again.

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

Prime Financial Propaganda

Bumberg – 6/18/09 – The U.S. may sell a record $3.25 trillion of debt this fiscal year ending Sept. 30, almost four times 2008’s $892 billion, according to Goldman Sachs.

Huh? That’s not possible. Lemme see here, the economy is about $12 trillion (adjusted for knee deep bull feathers), there is roughly $8.7 trillion in cash outstanding and the government wants to suck 37% of the total cash out of the economy by selling bonds? That is flat out ludicrous. What market is Golden Sacks trying to corner with that crap?

The CBO sez the ’09 deficit will be $1.8 trillion. Add to that $600 bn in short debt they have to roll over and there is a total of $2.4 trillion that MUST be sold. That’s not the “maybe” bull like GS uses. They’ve already raised at least $800 bn of that, so the residual to be sold is around $1.6 trillion. An enormous amount, for sure.

So GS exaggerates the bond sales by $1.1 trillion. What’s the point? Could it be that they want to stampede investors out of bonds and into stocks? Nah, they wouldn’t do that . . . .

June 18, 2009 Posted by | Daily Brief | , , | Leave a comment

Government Motors

“After strong-arming General Motors and its stakeholders into a painful bankruptcy filing expected Monday, the Obama administration is promising to remain a passive investor in America’s largest carmaker.

GM filed for Chapter 11 bankruptcy in New York Monday morning burdened with $173 billion in liabilities compared with its $82 billion in assets. In a statement, Kent Kresa, chairman of the company’s board of directors, said that the board authorized the filing “with regret that this path proved necessary despite the best efforts of so many.”

Optimistically, he added: “Today marks a new beginning for General Motors. A court-supervised process and transfer of assets will enable a new GM to emerge as a stronger, healthier, more focused and nimbler company with a determination not to just survive but to excel.”

Yes, of course. After firing the management of both Chrysler and GM, after overturning contract law and stripping bond holders of their assets, after forcing them to build the kind of cars the EPA wants, El Jefe Obama “will remain a passive investor.” Would that be like Hugo Chavez is a passive investor in Venezuela?

We can kiss these auto makers good-bye, they are finished and will become like the black holes of AIG, Fanny Mae and Freddy Mac, each requiring quarterly infusions of tens of billions to keep them — and their union masters —  afloat.

This is all part of the painfull process of ripping away the facade of the Potemkin Village that the US of A has become.

Oh, and by the way, Government Motors just sold its Hummer division to China. Wouldn’t you have liked to be a fly on the wall during that negotiation. So, I suppose we will now start buying our miltary equipment from China? With what? We’re broke. As of April, government tax revenues are down 35%.

June 2, 2009 Posted by | Daily Brief | 1 Comment

Cause & Effect

The following chart reveals the net result of profligate borrowing and spending.


Is it worth it to destroy your currency to save your “economy?” I use that term”economy”  with a bit of disdain. This is what we get for clever financial manipulations and fraud.

The oil price is all aboutoil printing too many dollars, suddenly showing a 36% increase in May alone. Its called inflation, and it shows up in strange places, not always general price increases. Energy intensive agriculture products prices will soon follow,  so be sure to make some extra room in your food and energy budgets. We got a brief respite in gasoline and home heating and cooling, but that is also about to come to an abrupt end.

And so will a lot of other things we’d rather not think about. Enjoy the “green shoots” while they last.

June 2, 2009 Posted by | Daily Brief | Leave a comment

Tiny Tim Geithner Gets His Due

The man actually had the chutzpah to give a speech at Peking University where he told three big lies. People like him are constitutionally incapable of not lying, and his audience called him on it in a most embarrassing way.

First he said, “Chinese assets are very safe,” in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

Next he claimed, “We believe in a strong dollar … and we’re going to make sure that we repair and reform the financial system so that we sustain confidence,” he said.

As if that were not enough, in his speech, Geithner renewed pledges that the Obama administration would cut its huge fiscal deficits and promised “very disciplined” future spending, possibly including reintroduction of pay-as-you-go budget rules instead of nonstop borrowing. “We have the deepest and most liquid markets for risk-free assets in the world. We’re committed to bring our fiscal deficits down over time to a sustainable level.”

His answer drew loud laughter from his student audience, reflecting skepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.

Concurrently, a former Chinese central banker referred to the Fed as “the world’s biggest junk investor,” and that its balance sheet is “ridden with rubbish.” Another Global crisis is inevitable unless the U.S. Stops spending and starts saving. Brilliant deduction, Sherlock!!! He also challenged Tiny Tim to “show us your arithmetic . . . . we need to know how the US government can achieve this objective.

Translation: Geithner, you are full of shit.

Of course the US media will not embarrass their man in Washington by reporting this story; it was only found in the foreign press, in this case Reuters.

June 1, 2009 Posted by | Daily Brief | Leave a comment

Bubbling Along

Everything seems to be bubbling along very nicely in the financial markets, does it not? Bit of tongue-in-cheek there on the bubbling bit since the powers that be are slashing all restraints in an effort to reinflate the credit bubble that just collapsed. The stock markets act as if there is no tomorrow (so what’s new?) while the precious metals act as if there is, and its not one gold and silver buyers are looking forward to.

Over the weekend President Change had a revelation and announced “We’re out of money now!” says Number One. And he blames not having national health care as the cause. Brilliant. By that logic, we should make entitlements of every human need and then we’d be in great shape. I’m not digressing here, just providing the proof that things are going to get much, much worse. This is a government that has no intention of reigning in deficit spending. It simply creates new excuses for doing so, then eagerly adds to the pile of debt.

Unfortunately for this President, there is the law of cause and effect, the consequences of which one can push aside and ignore for just so long until the hand that feeds you whips around and bites your head off. This is about to happen, and this is the week that the process may begin. You see, this week Obama’s fall guy Timmy Geithner has to sell $101 billion of debt at auction this week. And with another $1.8 trillion in debt to sell by September 30th, every week until then will host a huge auction.

Due to all the new money and credit creation, the US bond market has been looking weaker and weaker every week. As well it should since the law of supply and demand can only be manipulated so far by Bernanke. Yields on the long bonds are rising, meaning that prices are falling. Bernanke is about to loose control over the interest rates since the rates will have to rise to be able to sell those bonds. Only an idiot would flood the market with new issues and expect that prices would remain high and interest rates low.

The truth is that the Fed has been manipulating ridiculously low rates for nearly two decades, which is the main factor that wrecked the economy. But this cannot continue. Whether he floods the market with new issuance, or he chooses to buy up the debt himself with printing press money, the end result is the same. Printing money causes inflation, and inflation drops bond prices and raises interest rates. Conversely, trying to dump $1.8 trillion in new bonds floods the market and derives the very same result. Either of these options will result in the USG being unable to continue financing its spending sprees at best, and at worst, collapse the economy and the government.

The third option was the one that I stated at the very outset of this fiasco, as being the one with least ugly consequences. And that is: Stop manipulating interest rates, allow rates to rise and suffer the consequences of the depression that will follow. With this option, the nation, the economy and the USG will survive; in the above two options, none of these are likely to survive as that is the “banana republic” prescription and will lead to the very same consequence as obtained by every government that has tried it — economies collapse and governments collapse.

Interest rates are not the only thing being manipulated. The so-called “news” as proffered by big corporate media has reached Orwellian conditions, driving the stock markets up with its endless propaganda. Yet even when digging deep, well past the page one drivel, one can find nothing but bad economic news on every front. The economy is worsening at an accelerating rate, while a new credit bubble is developing in the parasitical financial markets. Yet overall, credit expansion continues to decline despite the massive bailouts to mega banks.

I’m still sticking with my prediction of a year ago that there will be a second leg down to this disaster. The first phase was the financial collapse, but this is to be followed by economic collapse as the government/media efforts to paper over a disaster with bull shit eventually becomes exposed for the criminal travesty that it really is. The king has no clothes, and both he and his subjects are broke.

Only the conspiracy of the universal belief in the doctored check book presently keeps things afloat. Meanwhile, the bounced checks, late fees and interest rates are increasing: the magical mystery tour that is Wall Street refines lead into gold.

Why shouldn’t stocks be doing well when CEOs manipulate their accounting to drive up the price of their own stock hoards? How do these companies keep reporting good earnings when every aspect of the economy is down? Why do P/E ratios remain absurdly high? Duh, I dunno.

(RTTNews) – JPMorgan Chase & Co. stands to reap a $29 billion windfall due to an accounting rule that lets JPMorgan transform bad loans it purchased from Washington Mutual Inc. into income, the Bloomberg reported Tuesday.

The above is not an odd occurrence, rather it is the norm, the way things are done in a society where morality is viewed as quaint and irrelevant to post historical modernism. All the books are cooked and it is a phantasmagorical world in which we now live.

The yield on the 10 year note rose 9 bp to 3.54 and the 30 year bond 9 bp tp 4.48. Indications are that private investors are fleeing the treasury market as foreign central banks accounted for well over half the issues. Are these the storm clouds massing on the horizon? Time will tell.

May 26, 2009 Posted by | Daily Brief | Leave a comment

Chinese-American Ponzi Scheme Ending

Running a trade deficit means that a nation pays out more than it takes in. Over time a nation can loose all its money but for the usual dishonest machinations of governments to conceal the nature of the problem. In the case of the US, which imports three times as much as it exports, those deficits have been financed by those nations that sell the largest amounts to us.

The major portion of US defict is financed by China and Japan who purchase US Treasury and other bonds. China holds over $1 trillion and Japan $900 billion. But with the US borrowing and throwing money around like it were mere fertillizer, our creditors are beginning to take notice.

“We have lent a huge amount of money to the United States,” Chinese Permier Wen Jin Bao said at a press briefing in Beijing today after the annual meeting of the legislature. “Of course we are concerned about the safety of our assets. To be honest, I am a little bit worried. I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

Which means, don’t print money to solve your debt problems.

“China is worried that the U.S. may solve its problems with the fiscal deficit and banks by printing money, which will stoke inflation,” said Zhao Qingming, a Beijing-based analyst at China Construction Bank Corp., the country’s second-biggest lender. “If the U.S. can make sure this won’t happen, then China will continue to invest.”

Delegates of China’s legislative advisory body suggested that the biggest foreign holder of U.S. debt diversify away from Treasuries into more risky assets at the annual meeting that started on March 3.

One of the major constraints on Chairman Bernanke’s desire to print money (via the purchase of US government debt) has, no doubt, been the worry about a potential backlash from China, the biggest buyer of US debt.

The heretofore mutually beneficial arrangement of China purchasing US debt with trade surpluses generated by American purchases of Chinese goods is drawing to a close. China’s trade surplus has all but evaporated, eliminating the need or ability of China to purchase additional US debt. In addition, the Chinese have made it clear that their national interests are best served by diversifying into commodities and other real assets, the value of which is not contingent upon an over-leveraged debtor nation.

Meanwhile, the financial media is celebrating a rally in the stock markets and calling for a bottom and a turnaround. They wish. Because that is all it is. Not one single problem of the financial collapse has been solved. After two years of throwing handfuls of water at a forest fire, the latest proposal is to simply cover up the banking problems by a return to mark-to-model accounting. In other words, if you are bankrupt, all you need to do is just change the numbers and presto! Everything’s A-OK. Except that its not.

The United States of America may yet be able to stave off a complete and total economic collapse – one that was guaranteed by the reckless activities of the last two years – but only for a matter of months, not years. Introducing more lies and deception into a system already living in fear of deception won’t making things better. It will only force even more capital to the sidelines.

As I’ve written before, the jig’s up when China sees better uses for its money than lending it to a deadbeat. That time is getting dangerously close.

March 13, 2009 Posted by | Daily Brief | Leave a comment