Monday, March 10, 2008

Global Elites Gone Bonkers

March 11, 2007

Plublisded on: ,

Before addressing our global monetary infectious disease, a serious correction has to be made: in many articles 'capitalism bashing' has gone unabated especially since the subprime housing bubble has burst. This is irritating because the notion of big government and central banking (the commerce of usury included) are the two main planks of the Communist Manifesto. Capitalism goes along with limited government and hard currencies. There is no shortage of disconnects in logic. In fact it is kind of appalling to read leftist and pro-globalist editorials and essays vilifying greedy-capitalism restlessly while they merely depict the deep flaws inherent to the centralization of power - aka the Socialist Ideal.

Although Darryl Schoon shows up as a hard currency advocate, he still asserts that capitalism sets in motion its demise, the greater the expansion the greater the debt. Well... well, while we're at it, it would be useful to add: as long as the populace buys this fallacy and fail to realize that savings is impossible when living beyond one's means. This has nothing to do with capitalism but market indoctrination. The boomers thought that they would enjoy retirement and most of them are going to fall very short. Wan Lixin at the, like many, is fed up and for him everything is crystal clear: The Monster US supercapitalism eats the middle class and democracy. Instead of 'Supercapitalism' he should write 'Superdebtism'. Lixin cites many prominent names but never condemns the credit conditions during the events he describes in length. Again debt addiction and currency debasement are among the recurring fallacies used by the Global Elites to get richer and quicker 'is' anti-capitalist, period. Thinking that the panacea for debt is credit is a 'universal delusion'.

Lenin's famous quote: 'The best way to destroy the capitalist system is to debauch the currency' - ditto, congratulations, mission accomplished!

Frank Shostak explains why too much debt alone sets in motion a series of random shocks: 1) The act of debt liquidation forces individuals into distressed selling of assets - 2) as a result of the debt liquidation the money stock starts shrinking and this in turn slows down the velocity of money - 3) a fall in money leads to a decline in the price level - 4) the value of people's assets falls while the value of their liabilities remains intact, which precipitates bankruptcies...

Whatever systems is in place, none can survive lies and frauds in the long run and this can be traced back to most omnipotent governments that have ruled since the beginning of Mankind. Even the gold standard couldn't prevent the Kings and Emperors from embarking on ruinous military expeditions or reevaluating their coins when they felt in the mood to do so, which is the same as giving an arbitrary value to today banknotes. Markets must define the price or precious metals, fluctuating according to the supply and demand. Neither governments nor central banks can fix their prices by controlling the interest rates as they see fit. 'Price-fixing' lawsuits are nothing new. So why should we let some powers-that-be commit the same crime? What we are really witnessing are the damages of collectivism and debtism, such as described by A. Hayek in 'The Road To Serfdom'.

The Transparency Black Hole And The bailout Game
Last January the Davos elites ('they') gathered again to discuss the possible options as the world economy and the fabric of societies deteriorates to a point of no return. The disease can easily be identified and is named extraordinary leverage. Amid the institutionalized meltdown, it would be useful to mention this very 'Obama bill' whose purpose is to alleviate global poverty and amounts to $845 billion. Additionally, he's eying a $120 Billion Stimulus Plan while No joke! Where is Barak Obama going to find the money considering that every household in America owes $400,000 to the Treasury (grand total, future liabilities included) according the former GAO chief, Paul Walker? What happens when consumers stop consuming?

A few weeks ago, Greenspan said at the CERA Conference that the economy would continue to erode until there is a stabilization of U.S. housing prices: "we have a long way to go" before housing prices hit a bottom. As of February 25, Greenspan reiterated with his usual aplomb that US economic growth stalled and a quick recovery was unlikely. Contrarian estimates seem to point to a decline in house price of at least 30% over the next 2 or 3 years, this means a loss of at least $4 trillion in market value if only 20% loss in market value occurred. So far the U.S Subprime meltdown has cost the world $8.6 Trillion according to the contrarians while the mainstream figures announced $7.7 trillion. The scariest part is that it will also affect corporate earnings.

Now we see the deep bottom line as Bank of America asked Congress for a $739 Billion Bank Bailout. This real Estate market is a bottomless pit. The Fitch rating agency, early March, warned that US Alt-A RMBS performance deteriorates rapidly with an outstanding balance of approximately $160Bn. Stimulus for this, rescue package for that... so why not bailing out the corporations while they are at it? Economic fascism occurs when profits are privatized and costs are socialized. For the record, did you know that Fannie Mae's shares went from $70 in August to less than $22 on March 6, 2008; Freddie Mac's from $65 to less than $20 over the same period. Fannie and Freddie are worth 40% of America's $11,500Bn of outstanding home loans! Moody’s estimated that three million subprime borrowers will likely default over the next several years; and that 8.8 million homeowners, or about 10.3% of homes, will have zero or negative equity by the end of the month. In Washington, the Democrats are upset at the Bush Administration which blocked their bill to help homeowners. Yet the same democrats are in favor of government-funded mortgage buyout. Banks' losses could put $900bn squeeze on consumers. This is communism of the most subtle kind. Corporate welfare cost U.S taxpayers already $120bn per year, revealed in 2003. How much is it today exactly? Did it solve anything? The lobbies' task is to get the government out of their way in order to obtain freer rein for 'financial innovation'.

As long as the consumers/voters fail to see the big picture, legal financial scams will remain pervasive. It is all over again, during the Great Crash of 1929, there 25% of banks in America went belly up. Many people saw market speculations engaged in by banks during the 1920s as a cause of the crash. A new banking regulation, Glass-Steagall Act, was passed in 1933. History repeats itself: it is just another regulation that went down the tube. More over, it is a well-known fact that when Alan Greenspan became the Maestro in 1983, he was strongly in favor of banking deregulation. And long before that in 1966, he wrote 'Gold and Economic Freedom', an essay available on the internet.

As the web of debt gradually expanded, 'they' faked the enforcement of some semblance of transparency. That is precisely why the public fell asleep at the wheel. Alas when debt cannot be repaid it is destroyed, that as simple as that - and as financial history shows, often at the expense of the ignorant masses. Panic is not a vain word anymore. A Wall Street bank run has become a (high) probability. David Ignatius at the wrote a piece that tells us why the system is about to screech to a halt. Here is an excerpt:

Frightened financiers are pulling back from credit markets
-- going on strike, if you will -- to escape the unraveling daisy
chain of securitized assets and promissory notes that binds the
global financial system. As each financier tries to protect against
the next one's mistakes, the whole system begins to sag. That's what
we're seeing now, as credit market troubles spread from bundles of
subprime residential mortgages to bundles of other kinds of debt --
from student loans to retailers' receivables to municipal bonds.

Most people dislike economics because of its convoluted jargon. If they only knew that it was a trick to deter them from learning. So, what hide terms such as collateralized debt obligations (CDOs) or structured investment vehicle (SIV) for example? If you do not have a clue and are about to start scratching your head, here is what Richard Sylla, professor of economics and financial history at NYU's Stern School of Business says an report titled 'The black box economy' by Stephen Mihm last January.

"A lot of financial innovation is designed to get around
regulation. The goal is to make more money, and you can make more
money if you don't have to keep capital to back up your investments."

Examples abound in the financial press. Interestingly enough, this article on gives us another hint that corroborates Sylla's definition:

... The new source of potential losses: so-called variable
interest entities that allow financial firms to keep assets such
as subprime-mortgage securities off their balance sheets. VIEs
may contribute to another $88 billion in losses for banks roiled
by the collapse of the housing market, according to bond research
firm CreditSights Inc. Goldman, which hasn't had any of the
industry's $163 billion in writedowns, said last month it may
incur as much as $11.1 billion of losses from the instruments...

So from now on - and trust me that it will make you sound ultra-smart - every time you read some sophisticate terms in whatever economic column, remember professor Sylla's theory. This is actually pretty frightening because in the midst of the deep recession, the Davos folks, ('they') are the ones who will come up with more regulations to nowhere to satisfy the common man's outcry, be given more power and of course big pay raises.

Ever heard of the wolf in sheep clothing? Bill Gross, manager of the world's largest bond mutual fund, sums it up like this: it is 'Frankensteinian' levered body of shadow banks promoting a chain letter, pyramid scheme of leverage' in his January newsletter. If this leaves you enough moral strength to face the monster, I invite you to read Michael Lewis' Inside Wall Street's Black Hole and who has investigated the Black-Scholes model invented by a pair of finance professors at the University of California at Berkeley. The model is based on the assumption that a trader can suck all the risk out of the market by taking a short position and increasing that position as the market falls, thus protecting against losses, no matter how steep. Nearly every employee stock-ownership plan uses Black-Scholes as its guiding principle. Excuse me: Merton and Scholes received the 1997 Nobel Prize in Economic for what - to transform the world into a mega-giga casino?

(Reuters:03/08) A systemic credit crunch is underway, driven
primarily by bank writedowns for subprime mortgages," according to
the report co-authored by analyst Christopher Flanagan at
PMorgan Chase & Co. "We would characterize this situation
as a systemic margin call'...

The problem is not a liquidity crisis per se but too much liquidity flooding the market and whose value is getting increasingly worthless because there is too much money purchasing goods and services. But once a currency gets close to junk, we easily can imagine the amount of banknotes that are needed to achieve the same results. So indeed, more cash is needed to help the system stay afloat, hence the term 'liquidity crisis'. To add to the injury, Michael Shedlock, a prominent contrarian, declared as of 01/29 that the bank reserves went negative, an observation based on a chart by the Federal Reserve of St Louis. Yep folks, most American banks are now insolvent or on the brink to become so. If it is that bad at BofA, why is the balance sheet looking like at the other major banks? For the cherry on the cake, let's not forget that Fitch disclosed its fatally flawed Rating Model...but since the two others, S&P and Moody didn't do a thing either, we ought to conclude they also are affected by the same infectious myopia. All we can do is to brace ourselves for the coming collapse of International Credit Ratings.

What the heck are the regulators doing, would you ask? That is a good but silly question. There is so much gaming out there, the latter are outsmarted and intimidated by the cliques they are supposed to monitor and rush to settle litigations as quickly as possible due to peer pressure. Having super-cop-regulators patrolling the stock exchanges, banks and brokerage firms would not only be proven extremely costly but futile. It is time to get real: the FDIC can insure deposits, but not purchasing power. Another regulation that will soon be proven completely worthless. To put it simply: we are freaking d-o-o-m-e-d!

No Place To Hide
Let's take a pause here: the other day, scientists confirmed a fact that every smart person already knows. Like ants or sheep, humans are easily led, they said. The article continues: Researchers at Leeds University believe their findings could have important applications, notably in the management of disasters... with the global financial meltdown around the corner, how cynical is that? What will the Herds be looking like when rushing to the exits? What I want to say here is that the market behaves irrationally, when there is a booming mania, investors follow blindly and are thus uncontrollable.

CNN, as of Feb. 6, had a simple explanation for the stock market's mixed outcome, suggesting that rising inflation might prevent the Fed from making further interest rate cuts. Back to the market. This means that stock market players have not forgotten the Maestro's era of cheap money and its ensuing boom - and that nostalgia is flying high. If the fed's rates were going back to 1%, we're willing to bet that we'd have DOW 20,000 by now!

The truth is about to catch up with us. Even George Soros admits that 'we are at the end of an era of credit expansion' when saying that the crisis originates in the heart of US capitalism - please note this demonization of capitalism again. The debt tentacles have so many ramifications that it doesn't bode well: America will drag many in its fall. That is what happens when a currency is made the world currency reserve. 'The Davos elites knew that the USD would eventually give up, and they created the Euro to replace it - but will it work? Considering that the major European economies are practically on the brink, there is no magic solution. Unless the Chinese government starts distributing credit cards for free, don't hold your breath either: At 37 times trailing earnings, China undoubtedly has the second world's biggest stock-market bubble. Today international corporations invest massively in Vietnam where the production costs are one-third cheaper than in China.

The creation of the Euro was designed to enhance trade, employment and to prevent currency fluctuations, the Elites told us, remember? We see the results after less than a decade. Europe is prompted to 'its own Review Rules' following the investigation of the bailouts of two German banks hit by the subprime lending crisis in order to determine whether they violated rules on state aid for ailing enterprises. The German taxpayers must have a verybitter taste in their mouths. All this taxpayers’ money which poured into once-profitable banks that took excessive risks, profiting mainly the top 10% of the population among which we find top executives who evade €30bn of tax yearly... Is Germany, Europe's biggest economy, a corporate swamp? The asks. Der Spiegel declared that the German State-Owned Banks on Verge of Collapse. The columnist doesn't mince his words:

.. greed and political protection that is symptomatic for many of
Germany's state-owned, partially state-owned and public sector
banks. It is an environment that can only thrive in the shadow of
the state -- and that has drained more than €20 billion
from the public treasury within the last decade. (Feb/20)

As of 02/22, ran an editorial in the same mold titled 'The fall of a financial model':

...Unlike the internet bubble, this is not a crisis based on
irrational behavior but one of sophistication and disintermediation.
The new risks produced by financial innovation were left to
a sector that alone was considered able to understand its instruments.
The crisis demonstrates the costs to the real economy and
lack of an efficient self-regulating system.

Interestingly enough that same week, Spitzer dropped a bomb when declaring that Bush administration was predatory lenders' partner in crime; that the government chose instead to side with the predators. What have the democrats been doing during all this time? This is called a conspiracy of silence and of course nothing of this was aired on TV.

Since my editorial 'Hey Buddy, can you spare $1,000 trillion?' written in October 2007, the derivatives market grew from 516 to 681 trillion! Meanwhile the global stock market cap is approximately $51 trillion. Because derivatives are similar to insurances against value depreciation, how can we have such a big gap?! We are in big trouble, guys! Bear in mind that what is occurring right now is the consequences of debts and their compounding interests added to the so-called financial innovations in order resell the same debts a zillion times. Yet according to a survey released by Harvard Business School and Dartmouth College, Americans don't understand debt, which may be one reason that they have too much of it. Even those with a college degree don't possess an understanding of the basic finance ideas, the CNN columnist writes. Considering the worlds deficits and imbalances, this shouldn't come as a surprise: how many prestigious degrees are there among the global elites? Are they just ignorant or have they gone bonkers while succumbing unrestricted stupid greed?

This tells you how dire and surreal the world situation really is. World citizens have been completely abandoned by their lawmakers and financial institutions, which are now in 'cannibalistic mode', fighting and dancing around the remains of a 'mega-toxic-debt carcass'. The ' Kerviel-SoGen Affaire' illustrates this perfectly. Societe Generale missed 75 warning signs on the activities of rogue trader Jerome Kerviel, the revealed. Read my lips: seventy-five! It gets outrageously funnier. Mr Kerviel got a €60,000 bonus for 2006 and €300,000 bonus for 2007. The article goes on: "At this stage of the investigations, there is no evidence of embezzlement or internal or external complicity," the report said. Bear in mind that the French bank' losses totaled €4.9 billion.. As for the European elites, it all comes down to which 'scum' is on the menu. Hear this: Massive suspicion of fraud report (funding worth £100 million a year) won't be published, say Euro-MPs. Another example is that of fund manager John Paulson who cashed up to $4 billion speculating against the housing bubble and whose adviser was no other than Sir Alan Greenspan. By telling the Gulf Sates to drop dollar, which game is the Maestro playing exactly? Since Greenspan will be remembered as the engineer of the Great Fall of America, the Federal Reserve Bank of New York doesn't deserve a "presumptive triple-A" but a'mid-grade junk' credit quality instead. Do you agree? Have 'they' never heard of the Law Of Diminishing Returns? Seven years later, in gold terms today, the market is down more than 70 per cent from its peak in the year 2000, acknowledges Mark Farber, known as Dr Doom. Bernanke policy to `Destroy' U.S. Dollar, he concluded. Dr Doom should be trusted and here is why: as of 03/07, The Federal Reserve on its website announced two initiatives to address heightened liquidity pressures in term funding market; considering that the nonborrowed reserves went negative one month ago or so, it looks like the panic mode is now a step closer. But for the Dr Doom crowd the game is over: The Fed's rescue attempt has failed. In his article titled 'The Upcoming Financial Pandemic', Roubini explains how the contagion will spread.

A Culture of Greed. Stupid greed nonetheless. Fake greed. 'Greed' cannot help when one is ignorant; most Wall Street players do not know the name of the game. Kings become beggars and play musical chairs. Today central bankers and their cheerleaders ask one another to neutralize currency volatility and to keep inflation in check while trying to find a way to get rid of their own dollar/foreign reserves; they all know how American's reckless policies have set in motion several calamities - moral hazards - that are going wrench the entire planet.

A Revolt Of The Debt-Slaves In Sight?
Despite the corruption running deep, Regulators Hope to Make Wall Street Pay for Its Role in Subprime-Mortgage-Fueled Housing Bust. Duh! Do they mean that we'll see several of those several spectacular and massive settlements, which do not have any other purpose than tone down persistent rumors while enriching the law firms cartel? Let's not kid ourselves. What we need is to challenge the entire power pyramid instead of putting band-aids here and there (useless reforms) because obviously doing so doesn't work anymore. Ludicrously complex' bank products are being attacked as the financial firms are in the hole for an additional $600 billion, Bloomberg reports early March.

Out if curiosity, did you read in the press about this 'Home Owners' Loan Corporation ? I do not wish you to freak out, but you ought to know that The HOLC was part of the Home Owner's Refinancing Act, a Franklin D. Roosevelt New Deal agency established in 1933... during the Great Depression. So what?, you ask. It is a plan that Congress might resurrect (NYTimes 02/24), upon the advice of former Federal Reserve Vice Chairman Alan Blinder. We're on the brink of a (world) depression! Irony or cynicism, you decide: the, recently said that bank crises 'increase rate of heart attacks'.

Toward the end of February, Roubini, a prominent Keynesian economist whose reports rather brilliantly highlight the fraudulent premises of the system, forecast the next big event: 1 0 to 15 Million Households Likely to Walk Away from their Homes/Mortgages. There are consumers who bought a condo or a house even knowing that the monthly mortgage payments could be hardly met - but thought that the endless increase of their house value would rescue them anyway. It didn't play out this way: Subprime loans are defaulting even before being reset. 'Debt prison' could be a lifetime sentence as some lenders are working to create harsher penalties for those people. What is going to happen now that even Greenspan himself admitted that the US Growth is at Zero. With the banks turning off the credit pipeline and more Americans maxing out their credit cards to stay afloat, an upcoming economic contraction is just more than a certainty.

While in the US more homeowners began to walk away instead of paying their mortgages, in the UK, going bankrupt starts to be accepted as a way of life as going bust loses its stigma. In short they turn their backs and step away while shrugging. More candidates for the biggest-selling drugs of all time: antidepressants, which are now bashed by a recent UK study. What if they also did not work because people did not address the causes that make them depressed in the frist place? How can people believe in a system providing them with estimates and predictions that turn out always being false over a given period of time?

If we dare to honestly analyze all our attempts to revolutionize societies we must admit to having failed miserably. As our system was becoming more organized and socialized apparently it ended up generating has more (economic) slaves than 400 years ago. No more denial: money control doesn't work. It has never worked! What They know is that controlling the money supply leads to failures. They also know better how to protect their assets in time or economic hardship; that starvation, death and terror are keys to keep humans begging for protection. Time to go back to square one whatever may happen to the system, the latter is going to dismantle itself even if we do not intervene anyway. But instead of adding oil onto the fire by starting a bloody revolution, that very revolution should take place within our inner selves. There is no fight to win other than the motto: no force and no fraud. Therefore must we attribute the exponential growth of debt to a theft, thus a institutionalized coercive fraud which itself nurtures myriads of (un)intended nasty consequences.

True liberals, in the classic sense, refute government intervention. They have nothing in common with 'modern day liberals'. The latter don't seem to grasp that their altruism is highly inimical to their professed belief in liberty, Ben O'Neill asserts. He asks us to bear in mind that some of the largest Western charitable organizations were founded in the 19th century, at a time when the market was a lot free-er. Since then the expansion of the welfare programs has parasited the meaning of charity and damaged the charitable ethic. And as a matter of fact, he's absolutely right. Here is a compelling example: under the pretense of addressing global warming, the biofuel market has caused commodities to skyrocket (surging wheat, corn prices) all of which provoked riots around the globe, particularly in poorer countries. As a result, Zeigler, the UN Special Rapporteur on the right to food, told reporters in New York the following:

It is a crime against humanity to convert agricultural productive
soil into soil which produces food stuff that will be burned into biofuel
All causes of hunger are man-made, it's a problem of access, not
overpopulation or underproduction, and can be changed by human decision

That you believe in global warming or not shouldn't be the focus here, but its link to pollution and overconsumerism, hence superdebtism should be. So, now we are on the brink of man-made food shortages because we simply consumed our way to happiness, is that right? If the Elites were so smart, how does it comes that our brilliant politicians have let this consumerism grow out of control? For the sake of their 'own musty pulp economics'?

Although the anger at the Financial Elites is rising, it is not enough. The battle that has to take place must start intellectually, the understanding the inherent dangers of 'involuntary servitude' and 'legalized coercion'. The time has come to go back to school - self-teaching and home-schooling - to rediscover what the Founding Fathers truly meant when drafting the U.S Constitution.

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