Financial End Time
We are now entering the financial End Time. Bailout “Plan A” (buy the junk mortgages) has failed, “Plan B” (buy ersatz stocks in the banks to recapitalize them without wiping out current mismanagers) is fizzling, and the debts still can’t be paid. That is the reality Wall Street avoids confronting. “First they ignore you, then they denounce you, and then they say that they knew what you were saying all the time,” said Gandhi. The same might be said of today’s overhang of debts in excess of the economy’s ability to pay. First the policy makers pretend that they can be paid, then they denounce the pessimists as spreading panic, and then they say that of course students have been taught for four thousand years now how the “magic of compound interest” keeps on doubling and redoubling debts faster than the economy can squeeze out an economic surplus to pay…
Lisa:
Who is Behind the Financial Meltdown?
By Michel Chossudovsky
Global Research, October 11, 2008
…The shares of Morgan Stanley dropped 26 percent on October 9th, upon the expiry of the short-selling ban and a further 25 percent the following day…
In contrast JP Morgan Chase, controlled by the Rockefeller family climbed by almost 12%…
The winners of financial warfare are JP Morgan Chase and Bank America. Both banking institutions have consolidated their control over the US banking landscape. They have used the financial crisis to displace and/or take over rival financial institutions.
The concentration of wealth and the centralization of financial power resulting from market manipulation is unprecedented.
Full article:
http://globalresearch.ca/index.php?context=va&aid=10529
13 October 2008, 2:19 pmLisa:
Excellent site full of information and downloadable books. From England, and in the same line of thought as the American Monetary Institute:
http://www.jamesrobertson.com/index.htm
13 October 2008, 2:59 pmKim Sky:
Excellent site - thanx for the link!
In an indirect way, this reminds me of a conversation with a Bolivian friend of mine, just after we attended a film showing/talk about the uprising in Oaxaca. The young folk inspired by this revolt are now involved in a project to teach people how to use bicycles to power electricity and how to build compost toilets.
My friend says, yea, after the rebellion then what? What the people really need is MONEY, even the bicycles would help them — as bicycles, not as so-called electric generators. The questions, how does one rebel, how does one create new, uncharted forms for development? It all seems so abstract.
Intuitively I’ve come realize that a path to the End of the Employment Empire really does exist.
Thanx for this link!
Chao, Kim
14 October 2008, 11:38 amKim Sky:
What a real financial collapse looks like
http://www.brasschecktv.com/page/445.html
wow, a lesson not to be ignored.
14 October 2008, 12:26 pmRobert Karaffa:
Ah, yes, Argentina. The micro-model for what happens now globally. Just remember that sociopaths aren’t impressed with Ghandi…or Jesus. So many people tell us that knowledge is power. It is not. It can be the best tool in the right hands. Power however derived is Power. Power needs greed and ego. That’s pretty much all that it really needs. Mechanisms are found to facilitate this. If knowledge itself is power, then one might as well say that money is wisdom, and extremism is Clarity.
15 October 2008, 8:59 pmLegume Sam:
Watch, now, as one half of society is hired by the elites to work for the debt collection agencies, so as to persecute the other half. In the end, though, there will be no squeezing of blood from stones. Asset seizure will not work against those with no assets.
16 October 2008, 5:39 amLisa:
Additional Thoughts on the Bailout
“We hang the petty thieves and appoint the great ones to public office” - Aesop
By Paul Craig Roberts
October 16, 2008 “Information Clearinghouse” — Just as the Bush regime’s wars have been used to pour billions of dollars into the pockets of its military-security donor base, the Paulson bailout looks like a Bush regime scheme to incur $700 billion in new public debt in order to transfer the money into the coffers of its financial donor base. The US taxpayers will be left with the interest payments in perpetuity (or inflation if the Fed monetizes the debt), and the number of Wall Street billionaires will grow. As for the US and European governments’ purchases of bank shares, that is just a cover for funneling public money into private hands.
The explanations that have been given for the crisis and its bailout are opaque. The US Treasury estimates that as few as 7% of the mortgages are bad. Why then do the US, UK, Germany, and France need to pour more than $2.1 trillion of public money into private financial institutions?
Full article:
http://www.informationclearinghouse.info/article21034.htm
16 October 2008, 8:30 pmLisa:
Weekend Edition
October 17 / 20, 2008
Turn Them Into Public Utilities
No More Investment Banks
By MIKE WHITNEY
http://counterpunch.com/whitney10172008.html
—————————————————————
Stock Market Crash: Post Mortem for Milton Friedman
Interview with economist Robert Pollin
by Mike Whitney
http://globalresearch.ca/index.php?context=va&aid=10586
17 October 2008, 7:00 pmLisa:
America’s de facto Finance Czar, US Treasury Secretary Henry Paulson has reached for the panic button and made a dramatic 180-degree reversal of his financial bailout plan passed only days before. On September 23 in testimony before the US Congress, Paulson, former CEO of the politically influential Wall Street investment firm, Goldman Sachs, declared his adamant opposition to the idea of the US Government taking equity stakes in troubled major banks in order to provide them capital and stabilize the frozen interbank trading market. On October 13, that opposition to ‘nationalization’ collapsed. What happened to cause that sudden reverse is what interests us here. It shows the utter lack of coherency in the US financial elites over how to deal with their home-grown securitization of risk fiasco.
Full article:
http://www.globalresearch.ca/index.php?context=va&aid=10599
18 October 2008, 6:08 pmLisa:
Oops! I forgot to include the title for the post above:
Financial Crisis: Paulson Panics as UK, Germany find own solution
by F. William Engdahl
18 October 2008, 6:09 pmLisa:
Parsing Mr. Paulson’s Bailout Speech: The Unprecedented Giveaway of Financial Wealth
By Michael Hudson
Global Research, October 18, 2008
Mr. Paulson¹s bailout speech on Monday, October 13 poses some fundamental economic questions: What is the impact on the economy at large of this autumn¹s unprecedented creation and giveaway of financial wealth to the wealthiest layer of the population? How long can the Treasury¹s bailout of Wall Street (but not the rest of the economy!) sustain a debt overhead that is growing exponentially? Is there any limit to the amount of U.S. Treasury debt that the government can create and turn over to its major political campaign contributors?
In times past, national debt typically was run up by borrowing money from private lenders and spent on goods and services. The tendency was to absorb loanable funds and bid up interest rates on the one hand, while spending led to inflationary price increases for goods and services. But the present giveaway is different. Instead of money being borrowed or spent, interest-yielding bonds are simply being printed and turned over to the banks and other financial institutions. The hope is that they will lend out more credit (which will become more debt on the part of their customers), lowering interest rates while the money is used to bid up asset prices real estate, stocks and bonds. Little commodity price inflation is expected from this behavior.
The main impact will be to reinforce the concentration of wealth in the hands of creditors (the wealthiest 10 percent of the population) rather than wiping out financial assets (and debts) through the bankruptcies that were occurring as a result of “market forces”. Is it too much to say that we are seeing the end of economic democracy and the emergence of a financial oligarchy a self-serving class whose actions threaten to polarize society and, in the process, stifle economic growth and lead to the very bankruptcy that the bailout was supposed to prevent?
Everything that I have read in economic history leads me to believe that we are entering a nightmare transition era. The business cycle is essentially a financial cycle. Upswings tend to become economy-wide Ponzi schemes as banks and other creditors, savers and investors receive interest and plow it back into new loans, accruing yet more interest as debt levels rise. This is the “magic of compound interest” in a nutshell. No “real” economy in history has grown at a rate able to keep up with this financial dynamic. Indeed, payment of this interest by households and businesses leaves less to spend on goods and services, causing markets to shrink and investment and employment to be cut back.
Full article:
http://www.globalresearch.ca/index.php?context=va&aid=10597
18 October 2008, 6:11 pmLisa:
Once in a century rip-off
http://www.youtube.com/watch?v=MdsnIYurpSM
More videos at:
http://therealnews.com/t/
18 October 2008, 7:19 pmLisa:
UP IN SMOKE: The abridged history of US investment banking
By Mike Whitney
Created Oct 19 2008 - 12:48pm
It worked. The credit markets have begun to thaw…The VIX, the Chicago Board Options Exchange Volatility Index—also known as the “fear index”–has skyrocketed to 80, a new record. But that is to be expected; after all, Wall Street is in a panic. The truth is, interbank lending is beginning to ease and the financial system has begun to function a bit more like it should.
That doesn’t mean we’re out of the woods by a long shot. The stock market will probably lose another 15 to 20 percent, unemployment will soar, real estate will continue to crash, and consumer spending will dry up. That’s all part of the hard landing ahead. But at the end of the day, some part of the credit-distribution system will still continue to function. That wasn’t always a certainty…
…Paulson stuck by his wacko plan even though more than 200 economists opposed him and the stock market tumbled 8 straight days in a row losing more than 15 percent of its value. The EU had to put a gun to his head to force him to do the right thing. Paulson’s Wall Street bias is so great that he would have driven the country off the cliff just to reward his dodgy friends with lavish cash giveaways from the US taxpayer…
Pam Marten summed it up like this:
“What most Americans do not understand, because mainstream media rarely explains it, is the incestuous relationship between the U.S. Treasury and this small band of financial marauders who busted the entire financial system with insane levels of leveraged derivative bets.” Amen…
Still, the remedy is simple and straightforward. The banks in question should be forced to establish their solvency according to “mark to market” evaluations (Triple A MBS=$.22 on the dollar) and if they cannot meet minimal capital standards; they should be taken into receivership, their equity shareholders wiped out, their leading executives removed, and they should be transformed into public utilities under the supervision of the Congress of the United States. Once the banks are entrusted to our elected officials, we can move on to the Federal Reserve. The “price fixing” and manipulation of interest rates by privately-owned banks is a failed experiment. It’s time to move on. Abolish the Fed.
Full article:
http://www.smirkingchimp.com/thread/18048
19 October 2008, 6:30 pmStan Moore:
I think Jay Hanson is right. Humans are genetically programmed to self-destruct. A minority of humans can see the patterns of history and object to the inevitable, but are powerless to stop it. In ecological terms, humans are an irruptive species whose ecological niche is supreme disturbance of all habitat types around the world and which ultimately serves as an anti-speciation agent of evolution.
And if some humans survive the forthcoming self-imposed calamity, our genes are programmed to repeat the process all over again at some time in the future once our numbers and impacts rise again. As a species, we simply cannot help ourselves and we cannot stop ourselves from our evolutionary task of self-destruction and harm to biodiversity in general.
Stan Moore
19 October 2008, 9:46 pmPetaluma, CA
charles:
“The development of capitalism has arrived at a stage when, although commodity production still “reigns” and continues to be regarded as the basis of economic life, it has in reality been undermined and the bulk of the profits go to the “geniuses” of financial manipulation. At the basis of these manipulations and swindles lies socialized production; but the immense progress of mankind, which achieved this socialization, goes to benefit… the speculators.”
— Aesop
22 October 2008, 10:26 amLisa:
Global systemic crisis Alert - Summer 2009: The US government defaults on its debt
- Public announcement GEAB N°28 (October 16, 2008) -
n this 28th edition of the GEAB, LEAP/E2020 has decided to launch a new global systemic crisis alert. Indeed our researchers anticipate that, before next summer 2009, the US government will default and be prevented to pay back its creditors (holders of US Treasury Bonds, of Fanny May and Freddy Mac shares, etc.). Of course such a bankruptcy will provoke some very negative outcome for all USD-denominated asset holders. According to our team, the period that will then begin should be conducive to the setting up of a « new Dollar » to remedy the problem of default and of induced massive capital drain from the US. The process will result from the following five factors studied in detail further in this GEAB:
• The recent upward trend of the US Dollar is a direct and temporary consequence of the collapse of stock markets
• Thanks to its recent « political baptism », the Euro becomes a credible « safe haven » value and therefore provides a « crisis » alternative to the US dollar
• The US public debt is now swelling uncontrollably
• The ongoing collapse of US real economy prevents from finding an alternative solution to the country’s defaulting
• « Strong inflation or hyper-inflation in the US in 2009? », that is the only question.
Studying the case of Iceland can give an idea of the upcoming stages of the crisis. That is what our team has been doing ever since the beginning of 2006. This country indeed provides a good illustration of what the US and the UK should be expecting. It can be considered – and that is what most Icelandic people do today – that the collapse of Iceland’s financial system came from the fact that it was disproportionate to the size of the country’s economy…
The sudden shock that will result from the US defaulting in summer 2009 is partly due to this decoupling of decision-making processes of the world’s largest economies with regard to the US. It is predictable and can be dampened if global players start to anticipate it. As a matter of fact, it is one of the topics developed in this 28th edition of the GEAB: LEAP/E2020 hopes that the September shock has “educated” the world’s political, economic and financial policy-makers and made them understand that it is easier to act by anticipation than in a panic. It would be a pity if Euroland, Asia and oil-producing countries, as well as US citizens of course, discover one morning of summer 2009 that, after a long-week-end or bank-holiday in the US, their US T-Bonds and Dollars are only worth 10 percent of their value because a « new Dollar » has just been imposed (12).
22 October 2008, 6:25 pmLisa:
Full article for the post above:
http://www.leap2020.eu/GEAB-N-28-is-available!-Global-systemic-crisis-Alert-Summer-2009-The-US-government-defaults-on-its-debt_a2250.html
22 October 2008, 6:36 pmLisa:
From Free Market Fundamentalism to State Capitalism
By
Henry C.K. Liu
For more than a year, since the US financial sector imploded in a credit crisis from excessive debt in August 2007, free market fundamentalists have been operating on a denial mode, claiming that the economic fundamentals were still basically sound, even within the debt-infested financial sector. As denial was rendered increasingly untenable by unfolding events, champions of market fundamentalism began clamoring for increasingly larger doses of government intervention in failed free markets around the world to restore sound market fundamentals. For the market fundamentalist faithful, this amounts to asking the devil to save god.
Aside from ideological inconsistency, the real cause of the year-long credit crisis has continued to be misdiagnosed in official circles whose members had until recently tirelessly promoted the merit of small government, perhaps even purposely by those in the position to know better and in whom society has vested power to prevent avoidable disaster. The diagnosis misjudged the current credit crisis as only a temporary liquidity quandary instead of recognizing it as a systemic insolvency. (See my January 26, 2008 article in AToL: The ROAD TO HYPERINFLATION - Fed Helpless in its Own Crisis)
The misdiagnosis led to a flawed prognosis that the liquidity crunch could be uncorked by serial injections of more government funds into intractable credit and capital market seizure. This faulty rationale was based on the fantasy that distressed financial institutions holding assets that had become illiquid could be relieved by wholesale monetization of such illiquid asset with government loans, even if such government loans are collateralized by the very same illiquid assets that private investors have continued to shun in the open market. Its not that government officials knows more than market participants about the true value of these illiquid assets; it is only that government officials with access to taxpayer money have decided to ignore market forces to artificially support asset overvaluation, the original root cause of the problem. Instead of being the solution, the government with flawed responses backed by the people’s money has become part of the problem.
Full article:
http://henryckliu.com/page171.html
22 October 2008, 6:37 pmLisa:
Death of the American Empire
America is self-destructing & bringing the rest of the world down with it
By Tanya Cariina Hsu
Global Research, October 23, 2008
I believe that banking institutions are more dangerous to our liberties than standing armies. (Thomas Jefferson, US President; 1743 - 1826)
America is dying. It is self-destructing and bringing the rest of the world down with it.
Often referred to as a sub-prime mortgage collapse, this obfuscates the real reason. By associating tangible useless failed mortgages, at least something ‘real’ can be blamed for the carnage. The problem is, this is myth. The magnitude of this fiscal collapse happened because it was all based on hot air.
The banking industry renamed insurance betting guarantees as ‘credit default swaps’ and risky gambling wagers were called ‘derivatives’. Financial managers and banking executives were selling the ultimate con to the entire world, akin to the snake-oil salesmen from the 18th century but this time in suits and ties. And by October 2009 it was a quadrillion-dollar (that’s $1,000 trillion) industry that few could understand.
Propped up by false hope, America is now falling like a house of cards.
Full article:
http://globalresearch.ca/index.php?context=va&aid=10651
23 October 2008, 1:00 pmLisa:
Richard Cook Interview–Financial Collapse, and Viable Solutions
So, the kind of revolution I’m talking about is a monetary revolution that would place purchasing power directly in the hands of the people for them to spend as they wish at the local level. Then, once you begin to produce in that way, you do create a certain level of savings, and that savings can then capitalize true capital markets where people pool their resources and savings. We don’t have true capital markets anymore—that kind of pooling of resources by average people where they can make investments. What we have instead is speculators buying stocks on margin or buying whole companies through equity purchases on margin where 90-95%–or more–of capital used in the system is bank leveraging; it’s speculative money that has polluted and poisoned the capital markets…
Full article:
http://globalresearch.ca/index.php?context=va&aid=10662
24 October 2008, 6:20 pmLisa:
Psychological Control: States of Mental Disempowerment
The relentless march toward tyranny in the United States and other nations with a heritage of freedom, underscored by the blatant criminality of the recent bailout package implemented against the political will and interest of the populace, seems to portend a terrifying future for humanity. It leaves us in a no man’s land between the familiarity of our previous reality and the uncharted dangers lying ahead.
Full article:
http://globalresearch.ca/index.php?context=va&aid=10687
25 October 2008, 11:07 amLisa:
Meet the World’s New Reserve Currency:
The Chinese Yuan
By Mike Whitney
October 25, 2008 “Information Clearinghouse” — Things are getting worse. On Friday morning, futures trading was halted for the first time ever after futures plunged more than 5 percent. The sell-off came after another 500-plus down day on the Dow followed by steep declines in equities markets across Europe and Asia. Japan’s benchmark index, the Nikkei, slipped more than 9.5 percent after Toyota and Samsung reported disappointing earnings. The news was equally bad in Europe where shares were battered across the continent on fears of a global recession. Since September, $16 trillion has been erased from global stock market value. Losses in the US–where the financial turmoil originated–have been much smaller than other, more vulnerable markets. The Dow is down less than 40 percent from its peak of 14,000, whereas Hong Kong, Poland and China have all tumbled more than 60 percent. Its a bloodbath.
Full article:
http://www.informationclearinghouse.info/article21090.htm
25 October 2008, 5:19 pmStan:
I’ll second Lisa on this article by Whitney… it lays some dynamics out in broad understandable strokes. What jumps out of it — as it does everywhere these days — is that the US really is entering, along with the world, a monumental class struggle. Every day the emperor looks more nekkid.
That scares me in some respects, inside the US at least. Because the class that has the most numbers and political clout call themselves “middle class,” they live in suburbs and exurbs, and they are about to be exposed to a lot of ever more open and reactionary demagogy.
That class struggle — if it is to make some claim on history — will have to be not the boss-versus-worker dialectic, but debt-holders versus the indebted. (In the circles I travel these days, there is a name for leveling power periodically by cancelling all debt and returning land to the people who lost it through indebtedness… Jubilee.)
In the meantime, how do we get through the global depression? I think this represents a great danger, but a great opportunity, too. All that permaculture, relocalization, neighborhood assemblies stuff might come in handy. People might like it. It could stick.
25 October 2008, 8:42 pmrgraves:
For those in the NYC area, an event featuring some of the foremost left analysts of the crisis. David Harvey gave a magnificent, accesible talk on the crisis this weekend at the Brecht Forum, and he’s back with friends this Wednesday:
October 29, 2008 - The Disruption: Left Interpretations
of the Financial Crisis
A panel discussion at 6.00 pm in the Proshansky Auditorium with:
Leo Panitch, Distinguished Research Professor, University of York and Editor of the Socialist Register
Doug Henwood, Editor of The Left Business Observer
David Harvey, Distinguished Professor of Anthropology and Geography, CUNY Graduate Center
Hector Figueroa, Secretary-Treasurer of SEIU Local 32BJ and affiliate, New York Civic Participation Project
Maliha Safri, Assistant Professor of Economics, Drew University
Co-sponsored with the Humanities Center
OCTOBER 29TH, 2008 * 6 PM * PROSHANSKY AUDITORIUM
CUNY GRADUATE CENTER * 365 FIFTH AVENUE @ 34TH STREET
27 October 2008, 9:06 amStan:
Aha! Well, here’s Bro’ Hudson this AM using the same inflammatory language. Class war, and the like.
27 October 2008, 10:10 amcharles:
How about demonstrations on Wall Street demanding a Debtors’ Jubilee from Financial Philanthropy ? (the “Philanthropy” is a bit tongue in cheek, but…)
27 October 2008, 4:12 pmLegume Sam:
How about if the owning classes donated a few branches of government to the rest of us?
27 October 2008, 7:14 pmLisa:
The Goldman Sachs Cadre in the Middle
of Conjuring up A Coup d’Ètat of Finance
http://www.engdahl.oilgeopolitics.net/print/20081013_alexjones_fwilliamengdahl.mp3
28 October 2008, 4:01 pmLisa:
October 30, 2008
America’s “Economic Egotism”
World Tires of Rule by Dollar
By PAUL CRAIG ROBERTS
What explains the paradox of the dollar’s sharp rise in value against other currencies (except the Japanese yen) despite disproportionate US exposure to the worst financial crisis since the Great Depression?
The answer does not lie in improved fundamentals for the US economy or better prospects for the dollar to retain its reserve currency role.
The rise in the dollar’s exchange value is due to two factors.
One factor is the traditional flight to the reserve currency that results from panic. People are simply doing what they have always done. Pam Martens predicted correctly that panic demand for US Treasury bills would boost the US dollar.
The other factor is the unwinding of the carry trade. The carry trade originated in extremely low Japanese interest rates. Investors and speculators borrowed Japanese yen at an interest rate of one-half of one percent, converted the yen to other currencies, and purchased debt instruments from other countries that pay much higher interest rates. In effect, they were getting practically free funds from Japan to lend to others paying higher interest.
The financial crisis has reversed this process. The toxic American derivatives were marketed worldwide by Wall Street. They have endangered the balance sheets and solvency of financial institutions throughout the world, including national governments, such as Iceland and Hungary. Banks and governments that invested in the troubled American financial instruments found their own debt instruments in jeopardy.
Full article:
http://counterpunch.org/roberts10302008.html
30 October 2008, 12:31 pmLisa:
Paulson’s Swindle Revealed
By William Greider
October 30, 2008 “The Nation” —
The swindle of American taxpayers is proceeding more or less in broad daylight, as the unwitting voters are preoccupied with the national election. Treasury Secretary Hank Paulson agreed to invest $125 billion in the nine largest banks, including $10 billion for Goldman Sachs, his old firm. But, if you look more closely at Paulson’s transaction, the taxpayers were taken for a ride–a very expensive ride. They paid $125 billion for bank stock that a private investor could purchase for $62.5 billion. That means half of the public’s money was a straight-out gift to Wall Street, for which taxpayers got nothing in return.
Full article:
http://www.thenation.com/doc/20081110/greider2?rel=rightsideaccordian
30 October 2008, 10:13 pmLisa:
October 31, 2008
FDR Explains the Crisis
Why 2008 Feels Like 1932
By PAM MARTENS
The parallels with 1932 are breathtaking: billions in bonds defaulting; dysfunctional global credit markets; commodity prices crumbling; stocks in free fall; home foreclosures; rising unemployment; banks teetering; an angry populace; a Republican administration clinging to their discredited trickle down theory; a Democratic contender for President with charismatic oratory skills tapping into the public mood with a message of a New Deal, this time called “change we can believe in.”
To complete the similitude, we need only a landslide victory for the Democrats in the upcoming election with Obama carrying all but six states.
It is no coincidence that our problems today are a replay of those of 1932, albeit with a less rapid economic descent because of the safety nets like Social Security and bank deposit insurance put in place by President Franklin Delano Roosevelt’s New Deal programs of the 30s. Each and every form of securities and bank fraud that led to the conditions of 1932 have been perpetrated again today. The only differences are that this time the Wall Street leverage is larger and the fraud frequently began its life with a triple-A pedigree and a legal opinion from a top tier law firm registered as a lobbyist with the U.S. government.
To make the point that an unregulated Wall Street has looted our nation twice in an eighty year span and brought it to its knees using the same treachery, I’ve sought out the assistance of the man who previously saved capitalism from the crony capitalists. Following is my interview with FDR, using quotations from campaign speeches he gave in 1932.
Full article:
http://counterpunch.org/martens10312008.html
31 October 2008, 1:11 pmLisa:
Massive Pension Fund Crisis in the US
By
Henry C.K. Liu
More than three years before the current financial crisis, in a series Greenspan, the Wizard of Bubbleland that began on September 14, 2005, I warned:
Through mortgage-backed securitization, banks now are mere loan intermediaries that assume no long-term risk on the risky loans they make, which are sold as securitized debt of unbundled levels of risk to institutional investors with varying risk appetite commensurate with their varying need for higher returns. But who are institutional investors? They are mostly pension funds that manage the money the US working public depends on for retirement. In other words, the aggregate retirement assets of the working public are exposed to the risk of the same working public defaulting on their house mortgages. When a homeowner loses his or her home through default of its mortgage, the homeowner will also lose his or her retirement nest egg invested in the securitized mortgage pool, while the banks stay technically solvent. That is the hidden network of linked financial landmines in a housing bubble financed by mortgage-backed securitization to which no one is paying attention. The bursting of the housing bubble will act as a detonator for a massive pension crisis.
Now in October 2008, while the US government is busy bailing out wayward banks, public pension funds operated by states and municipalities are facing their worst year of loss in history, exacerbating cumulative funding shortfalls of past decades of credit bubble and putting pressure on distressed state governments to shore them up to avoid pending default.
Full article:
http://henryckliu.com/page173.html
31 October 2008, 10:43 pmLisa:
From Free Market Fundamentalism to State Capitalism
By
Henry C.K. Liu
Part II: Treasury’s “Troubled Assets Relief Program” in Trouble
Treasury Secretary Henry Paulson asserts that the full resources of the Treasury Department are being used to ensure the success of its $700 billion Troubled Assets Relief Program (TARP). The “full resources of the Treasury Department” commands the full faith and credit of the United States anchored by Treasury’s taxing authority as approved by Congress. Tax payments in the US are made to the US Treasury via the Internal Revenue Service.
The Congress can approve taxes for and spending by the Administration, but Congress cannot create money like the Federal Reserve can. Treasury’s money can only come from future taxes approved by Congress. Article I - Section 7.1 of the Constitution stipulates that “All Bills for raising revenue shall originate in the House of Representatives.” The Federal Reserve has the authority to create money as part of its monetary policy prerogative but Treasury does not have any constitutional authority to expand the money supply. Treasury must depend on tax revenue for funds beyond which Treasury must sell sovereign debt to raise funds up to the national debt ceiling approved by Congress. Section 8.2 stipulates that only Congress have the power to borrow money on the credit of the United States. Proceeds from sovereign debt are advances on sovereign liability and not revenue, and must be paid back from future tax revenue.
Full article:
http://henryckliu.com/page172.html
31 October 2008, 10:47 pmLisa:
Call this a crisis? Just wait
Actually, don’t wait, because we’ve got to stop a bigger economic disaster in the making: 78 million baby-boomers eligible for Social Security and Medicare.
By David M. Walker, former U.S. Comptroller General
Last Updated: October 30, 2008: 10:55 AM ET
(Fortune Magazine) — Staring into the abyss always focuses the mind, which can help you avoid falling in. So let’s take a look at the potential catastrophe that awaits us once we survive our current crisis.
At the dawn of the 21st century the U.S. had $5.7 trillion in total debt. As we approach the end of George W. Bush’s presidency only eight years later, that sum has nearly doubled, thanks to war costs, tax cuts, spending increases, expanded entitlement programs, and now a welter of government bailouts and rescues.
This year was particularly bad. The federal budget deficit for fiscal 2008 hit $455 billion, up from $162 billion last year. That figure does not include the cost of the Emergency Economic Stabilization Act of 2008, which has an initial pricetag in the hundreds of billions of dollars. In fairness, some of that money presumably will come back to the Treasury, since the new rescue-related sums will be used to acquire preferred stock, mortgages, and other assets that someday could be sold at a profit.
Yet any such calculations are penny ante compared with the fiscal disaster that is bearing down on America. It’s no longer an event in the misty future. It officially began earlier this year when teacher Kathleen Casey-Kirschling of Maryland became the first baby-boom retiree to collect Social Security benefits. She will be followed by about 78 million more boomers over the next 17 years.
The entitlements due from Social Security and Medicare present us with that frightening abyss. The costs of these current programs, along with other health-care costs, could bankrupt our country. The abyss offers no assets, troubled or otherwise, to help us cross it.
Full article:
http://money.cnn.com/2008/10/28/magazines/fortune/babyboomcrisis_walker.fortune/index.htm
31 October 2008, 10:49 pmLisa:
October 31, 2008
The Great Bailout Fraud
Misrepresenting the Financial Crisis
By ISMAEL HOSSEIN-ZADEH
A major problem with the bailout scheme is that it misrepresents the ongoing credit crunch as a problem of illiquidity, or lack of cash. In reality, however, it is a lack of trust that has been created by the widespread insolvency in the financial market. In such an environment of widespread insolvency and lack of trust, owners of cash rush to safety: buying treasury bills, investing abroad, or hoarding their cash, thereby creating something akin to a black hole for cash—or a “liquidity trap,” as John Maynard Keynes called it.
The “lack-of-cash” premise has been successfully promoted to justify extraction of more than a trillion dollars of taxpayers’ money in the vain hope that it will free the “troubled assets” and create liquidity in the financial markets, thereby triggering a much-needed wave of lending, borrowing and expansion.
Full article:
http://www.counterpunch.org/zadeh10312008.html
31 October 2008, 10:50 pmLisa:
October 31, 2008
An Interview with Paul Craig Roberts
Is the Global Economy a Mistake?
By IGNACY NOWOPOLSKI
Paul Craig Roberts served as Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.
According to the basic definition an economy is the realized social system of production, exchange, distribution, and consumption of goods and services of a country or other area. Could you provide a brief assessment of the modern financial system’s contribution to the above mentioned functions?
PCR: A financial system matches up savers with investors and higher returns with higher risks. When this becomes global, misbehavior by the reserve currency country causes problems for all.
From my point of view the Wall Street investment systems have created much more harm than good for the world economy from 1929 onward. Wouldn’t it be advisable to eliminate so called “investment houses” altogether, leaving only a “traditional” banking system with a strict but simple regulations, in order to provide needed credits for tangible investments and a “safe haven” for customers deposits?
PCR: In the US the Glass-Steagall Act separated commercial from investment banking. It was repealed in 1999. As a result of the present crisis, the major US investment banks have disappeared as such, having become part of depositor banks or having become banks themselves. I don’t want to hypothesize if the modern economy can do without the investment bank function.
Full interview:
http://www.counterpunch.org/nowopolski10312008.html
31 October 2008, 10:51 pmLisa:
The Bailout’s New Financial Oligarchy
http://www.kpfa.org/archives/index.php?arch=28908
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Archives of Guns and Butter radio shows:
http://www.kpfa.org/archives/index.php?show=13
7 November 2008, 6:27 pmLisa:
Who are the Architects of Economic Collapse?
Will an Obama Administration Reverse the Tide?
By Michel Chossudovsky
Global Research, November 9, 2008
Most Serious Economic Crisis in Modern History
The October 2008 financial meltdown is not the result of a cyclical economic phenomenon. It is the deliberate result of US government policy instrumented through the Treasury and the US Federal Reserve Board.
This is the most serious economic crisis in World history.
The “bailout” proposed by the US Treasury does not constitute a “solution” to the crisis. In fact quite the opposite: it is the cause of further collapse. It triggers an unprecedented concentration of wealth, which in turn contributes to widening economic and social inequalities both within and between nations.
The levels of indebtedness have skyrocketed. Industrial corporations are driven into bankruptcy, taken over by the global financial institutions. Credit, namely the supply of loanable funds, which constitutes the lifeline of production and investment, is controlled by a handful of financial conglomerates.
With the “bailout”, the public debt has spiraled. America is the most indebted country on earth. Prior to the “bailout”, the US public debt was of the order of 10 trillion dollars. This US dollar denominated debt is composed of outstanding treasury bills and government bonds held by individuals, foreign governments, corporations and financial institutions.
Full article:
http://globalresearch.ca/index.php?context=va&aid=10860
10 November 2008, 3:32 pmLisa:
Fed Defies Transparency Aim in Refusal to Disclose (Update2)
By Mark Pittman, Bob Ivry and Alison Fitzgerald
Enlarge Image/Details
Nov. 10 (Bloomberg) — The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.
Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn’t require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.
“The collateral is not being adequately disclosed, and that’s a big problem,” said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. “In a liquid market, this wouldn’t matter, but we’re not. The market is very nervous and very thin.”
Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.
Full article:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aatlky_cH.tY&refer=worldwide
11 November 2008, 7:46 pmMark:
I’ve done my best to understand the international financial system, and to that end many links offered here have been of help. I’ve also tried to keep an eye on the publications that the “financial community” reads. This piece makes me wonder if the United States can continue to turn its growing financial weakness into a strength.
http://www.ft.com/cms/s/0/a6de7bdc-caaa-11dd-87d7-000077b07658.html?nclick_check=1
The crisis gives the US new financial power
By Ricardo Hausmann
Published: December 15 2008 19:19 | Last updated: December 15 2008 19:19
The economic crisis in the US signals the end of American global hegemony. Or does it? Pundits from different camps, some with fear and others with glee, contemplate a future where the US will have a much diminished weight in global affairs. But if the US plays its hand well, things will turn out to be just the opposite.
It is useful to remember that power is a relative, not an absolute concept. True, the US has been hurt by the current turmoil but so have many others. The Dow Jones is down by almost 40 per cent so far this year but this makes it pretty much the best performing stock market in the world.
More importantly, as far as power is concerned, unfriendly states such as Russia, Iran and Venezuela are suffering from a dual collapse in the price of their oil exports and the value of their sovereign bonds.
Remember the dangerous scenario this past summer with Russia intervening in Georgia and threatening Europe with the energy card?
Now, Russian policymakers perform daily prayers just to be able to open the stock market for regular business.
More broadly, the financial meltdown has translated into a sudden stop in capital flows to emerging and developing countries, which threatens to destabilise their growth, their financial systems and their government accounts.
Contrary to popular opinion, the current crisis has very little to do with the Armageddon that Nouriel Roubini, professor of economics at New York University, predicted over the past few years. In his mind, the widening US current account deficit would eventually top the willingness of the rest of the world to fund it, causing the US dollar to crash while long term interest rates on US Treasury bonds would soar.
That has little to do with this crisis: the US has become the only remaining super-borrower, able to issue thousands of billions of dollars in debt at record low rates while the dollar strengthens. People are unwilling to lend to almost anybody except for the US Treasury. This has allowed the US to provide – at record low cost – about $5,000bn (£3,325bn, €3,700bn) to bail out its financial system and organise a Keynesian reflation of its economy.
***
…if the US re-circulates financial resources, by on-lending to well behaved countries that have lost access because of the financial crisis, it would not increase its net debt but instead would make money for the US taxpayer while helping increase demand for US exports.
Fifth, re-exporting capital to the rest of the world would prevent the inconvenient strengthening of the dollar.
Finally, exercising this function would give the US enormous soft power in the world. Countries would have to decide whether they want to play ball with market democracy and benefit from access to the financial resources that the US and others can mobilise, or try to form a separate camp with Russia, Iran or Venezuela just as the rug has been pulled from under them.
***
16 December 2008, 1:02 pmRobert Karaffa:
LOOTING.
16 December 2008, 10:11 pmBuddhalovesPaine:
Mark,
If it is true, I wonder why the US has become the world’s only super borrower? The US is not the only country loaded with natural resources and with a well trained, hard working, clever, low paid workforce. It is not the only country with a civil society ruled by well made laws. It is not the only country with honest politicians. It is not the only country with a free press. It is not the only country running a massive deficit.
It is not the only country with a modern state of the art infrastructure. It is not the only country with many large businesses that can not pay their bills. It is not the only country that does not meet the Kyoto emissions goals. It is the only country that spends more on national defense than the next 9 or 10 countries put together.
Could that have something to do with it?? If so why??
STAN: I’ll add to that bullet list that it is the only country that successfully subordinated a global economy to its currency. This will also be a good deal of its inevitable undoing as an imperial power.
17 December 2008, 10:49 amBuddhalovesPaine:
Stan,
18 December 2008, 4:18 amYou summarized what I do not understand. How was the US able subordinate the world economy to its currency? Was it an extremely clever plan that the people in control of the rest of the world were unable to stop? Was it the stupidity of the rest of the world that allowed this state of affairs to be achieved? Or was it pure dumb luck that no one could foresee until it happened?
Also is it actually true? The dollar made a surprising recovery for a few months but that may just have been a last gasp recovery.
BuddhalovesPaine:
Well since no one wants to respond to my question maybe I have to answer it myself just like a good little
20 December 2008, 4:19 pmgrasshopper. My guess would be real estate, lots of relatively cheap but useful land. Sure there is cheaper land around but is there cheaper productive land? As some other countries become more industrialized maybe the US advantage in real estate, if it really exists will dwindle.
Is the undoing of the US as an imperial power inevitable? Can we just sit back drink a beer, or margarita, or ice tea and watch it happen or will some people actually need to grab some ropes and nails and hammers and pull off its imperial pedestal back on to the republican ground where it belongs.