Monday, December 14, 2009
Thank you Obama; it is getting easier to write about you and to ridicule your policies.
We had such high hopes of change, but alas.
Now we have to hear that war is justified in some cases.
Yes, of course: YOUR case. Every war monger has "a case". Ask them if they have a solid justification and reasoning for their wars. Of course they have!
Oil is no justification, land isn't, culture isn't, nothing is. Especially when the war is offensive and not defensive.
How the Nobel Prize Committee can sleep at night baffles me. Perhaps the prize is a tactical move to put him under pressure not to go to war? It looks that inflation in the US starts with Nobel prizes.
The latest joke of Obama can be read on ZeroHedge:
Please sit down. He said: "I Did Not Run For Office To Be Helping Out A Bunch Of Fat Cat Bankers On Wall Street. Some people on Wall Street still don't get it"
Thank you, please tell me more...
Friday, December 11, 2009
Obama's Big Sellout
The president has packed his economic team with Wall Street insiders intent on turning the bailout into an all-out giveaway
Barack Obama ran for president as a man of the people, standing up to Wall Street as the global economy melted down in that fateful fall of 2008. He pushed a tax plan to soak the rich, ripped NAFTA for hurting the middle class and tore into John McCain for supporting a bankruptcy bill that sided with wealthy bankers "at the expense of hardworking Americans." Obama may not have run to the left of Samuel Gompers or Cesar Chavez, but it's not like you saw him on the campaign trail flanked by bankers from Citigroup and Goldman Sachs. What inspired supporters who pushed him to his historic win was the sense that a genuine outsider was finally breaking into an exclusive club, that walls were being torn down, that things were, for lack of a better or more specific term, changing.
Then he got elected.
What's taken place in the year since Obama won the presidency has turned out to be one of the most dramatic political about-faces in our history. Elected in the midst of a crushing economic crisis brought on by a decade of orgiastic deregulation and unchecked greed, Obama had a clear mandate to rein in Wall Street and remake the entire structure of the American economy. What he did instead was ship even his most marginally progressive campaign advisers off to various bureaucratic Siberias, while packing the key economic positions in his White House with the very people who caused the crisis in the first place. This new team of bubble-fattened ex-bankers and laissez-faire intellectuals then proceeded to sell us all out, instituting a massive, trickle-up bailout and systematically gutting regulatory reform from the inside.
How could Obama let this happen? Is he just a rookie in the political big leagues, hoodwinked by Beltway old-timers? Or is the vacillating, ineffectual servant of banking interests we've been seeing on TV this fall who Obama really is?
Whatever the president's real motives are, the extensive series of loophole-rich financial "reforms" that the Democrats are currently pushing may ultimately do more harm than good. In fact, some parts of the new reforms border on insanity, threatening to vastly amplify Wall Street's political power by institutionalizing the taxpayer's role as a welfare provider for the financial-services industry. At one point in the debate, Obama's top economic advisers demanded the power to award future bailouts without even going to Congress for approval — and without providing taxpayers a single dime in equity on the deals.
How did we get here? It started just moments after the election — and almost nobody noticed.
'Just look at the timeline of the Citigroup deal," says one leading Democratic consultant. "Just look at it. It's fucking amazing. Amazing! And nobody said a thing about it."
Barack Obama was still just the president-elect when it happened, but the revolting and inexcusable $306 billion bailout that Citigroup received was the first major act of his presidency. In order to grasp the full horror of what took place, however, one needs to go back a few weeks before the actual bailout — to November 5th, 2008, the day after Obama's election.
That was the day the jubilant Obama campaign announced its transition team. Though many of the names were familiar — former Bill Clinton chief of staff John Podesta, long-time Obama confidante Valerie Jarrett — the list was most notable for who was not on it, especially on the economic side. Austan Goolsbee, a University of Chicago economist who had served as one of Obama's chief advisers during the campaign, didn't make the cut. Neither did Karen Kornbluh, who had served as Obama's policy director and was instrumental in crafting the Democratic Party's platform. Both had emphasized populist themes during the campaign: Kornbluh was known for pushing Democrats to focus on the plight of the poor and middle class, while Goolsbee was an aggressive critic of Wall Street, declaring that AIG executives should receive "a Nobel Prize — for evil."
But come November 5th, both were banished from Obama's inner circle — and replaced with a group of Wall Street bankers. Leading the search for the president's new economic team was his close friend and Harvard Law classmate Michael Froman, a high-ranking executive at Citigroup. During the campaign, Froman had emerged as one of Obama's biggest fundraisers, bundling $200,000 in contributions and introducing the candidate to a host of heavy hitters — chief among them his mentor Bob Rubin, the former co-chairman of Goldman Sachs who served as Treasury secretary under Bill Clinton. Froman had served as chief of staff to Rubin at Treasury, and had followed his boss when Rubin left the Clinton administration to serve as a senior counselor to Citigroup (a massive new financial conglomerate created by deregulatory moves pushed through by Rubin himself).
Incredibly, Froman did not resign from the bank when he went to work for Obama: He remained in the employ of Citigroup for two more months, even as he helped appoint the very people who would shape the future of his own firm. And to help him pick Obama's economic team, Froman brought in none other than Jamie Rubin, a former Clinton diplomat who happens to be Bob Rubin's son. At the time, Jamie's dad was still earning roughly $15 million a year working for Citigroup, which was in the midst of a collapse brought on in part because Rubin had pushed the bank to invest heavily in mortgage-backed CDOs and other risky instruments.
Now here's where it gets really interesting. It's three weeks after the election. You have a lame-duck president in George W. Bush — still nominally in charge, but in reality already halfway to the golf-and-O'Doul's portion of his career and more than happy to vacate the scene. Left to deal with the still-reeling economy are lame-duck Treasury Secretary Henry Paulson, a former head of Goldman Sachs, and New York Fed chief Timothy Geithner, who served under Bob Rubin in the Clinton White House. Running Obama's economic team are a still-employed Citigroup executive and the son of another Citigroup executive, who himself joined Obama's transition team that same month.
So on November 23rd, 2008, a deal is announced in which the government will bail out Rubin's messes at Citigroup with a massive buffet of taxpayer-funded cash and guarantees. It is a terrible deal for the government, almost universally panned by all serious economists, an outrage to anyone who pays taxes. Under the deal, the bank gets $20 billion in cash, on top of the $25 billion it had already received just weeks before as part of the Troubled Asset Relief Program. But that's just the appetizer. The government also agrees to charge taxpayers for up to $277 billion in losses on troubled Citi assets, many of them those toxic CDOs that Rubin had pushed Citi to invest in. No Citi executives are replaced, and few restrictions are placed on their compensation. It's the sweetheart deal of the century, putting generations of working-stiff taxpayers on the hook to pay off Bob Rubin's fuck-up-rich tenure at Citi. "If you had any doubts at all about the primacy of Wall Street over Main Street," former labor secretary Robert Reich declares when the bailout is announced, "your doubts should be laid to rest."
It is bad enough that one of Bob Rubin's former protégés from the Clinton years, the New York Fed chief Geithner, is intimately involved in the negotiations, which unsurprisingly leave the Federal Reserve massively exposed to future Citi losses. But the real stunner comes only hours after the bailout deal is struck, when the Obama transition team makes a cheerful announcement: Timothy Geithner is going to be Barack Obama's Treasury secretary!
Geithner, in other words, is hired to head the U.S. Treasury by an executive from Citigroup — Michael Froman — before the ink is even dry on a massive government giveaway to Citigroup that Geithner himself was instrumental in delivering. In the annals of brazen political swindles, this one has to go in the all-time Fuck-the-Optics Hall of Fame.
Wall Street loved the Citi bailout and the Geithner nomination so much that the Dow immediately posted its biggest two-day jump since 1987, rising 11.8 percent. Citi shares jumped 58 percent in a single day, and JP Morgan Chase, Merrill Lynch and Morgan Stanley soared more than 20 percent, as Wall Street embraced the news that the government's bailout generosity would not die with George W. Bush and Hank Paulson. "Geithner assures a smooth transition between the Bush administration and that of Obama, because he's already co-managing what's happening now," observed Stephen Leeb, president of Leeb Capital Management.
Left unnoticed, however, was the fact that Geithner had been hired by a sitting Citigroup executive who still had a big bonus coming despite his proximity to Obama. In January 2009, just over a month after the bailout, Citigroup paid Froman a year-end bonus of $2.25 million. But as outrageous as it was, that payoff would prove to be chump change for the banker crowd, who were about to get everything they wanted — and more — from the new president.
The irony of Bob Rubin: He's an unapologetic arch-capitalist demagogue whose very career is proof that a free-market meritocracy is a myth. Much like Alan Greenspan, a staggeringly incompetent economic forecaster who was worshipped by four decades of politicians because he once dated Barbara Walters, Rubin has been held in awe by the American political elite for nearly 20 years despite having fucked up virtually every project he ever got his hands on. He went from running Goldman Sachs (1990-1992) to the Clinton White House (1993-1999) to Citigroup (1999-2009), leaving behind a trail of historic gaffes that somehow boosted his stature every step of the way.
As Treasury secretary under Clinton, Rubin was the driving force behind two monstrous deregulatory actions that would be primary causes of last year's financial crisis: the repeal of the Glass-Steagall Act (passed specifically to legalize the Citigroup megamerger) and the deregulation of the derivatives market. Having set that time bomb, Rubin left government to join Citi, which promptly expressed its gratitude by giving him $126 million in compensation over the next eight years (they don't call it bribery in this country when they give you the money post factum). After urging management to amp up its risky investments in toxic vehicles, a strategy that very nearly destroyed the company, Rubin blamed Citi's board for his screw-ups and complained that he had been underpaid to boot. "I bet there's not a single year where I couldn't have gone somewhere else and made more," he said.
Despite being perhaps more responsible for last year's crash than any other single living person — his colossally stupid decisions at both the highest levels of government and the management of a private financial superpower make him unique — Rubin was the man Barack Obama chose to build his White House around.
There are four main ways to be connected to Bob Rubin: through Goldman Sachs, the Clinton administration, Citigroup and, finally, the Hamilton Project, a think tank Rubin spearheaded under the auspices of the Brookings Institute to promote his philosophy of balanced budgets, free trade and financial deregulation. The team Obama put in place to run his economic policy after his inauguration was dominated by people who boasted connections to at least one of these four institutions — so much so that the White House now looks like a backstage party for an episode of Bob Rubin, This Is Your Life!
At Treasury, there is Geithner, who worked under Rubin in the Clinton years. Serving as Geithner's "counselor" — a made-up post not subject to Senate confirmation — is Lewis Alexander, the former chief economist of Citigroup, who advised Citi back in 2007 that the upcoming housing crash was nothing to worry about. Two other top Geithner "counselors" — Gene Sperling and Lael Brainard — worked under Rubin at the National Economic Council, the key group that coordinates all economic policymaking for the White House.
As director of the NEC, meanwhile, Obama installed economic czar Larry Summers, who had served as Rubin's protégé at Treasury. Just below Summers is Jason Furman, who worked for Rubin in the Clinton White House and was one of the first directors of Rubin's Hamilton Project. The appointment of Furman — a persistent advocate of free-trade agreements like NAFTA and the author of droolingly pro-globalization reports with titles like "Walmart: A Progressive Success Story" — provided one of the first clues that Obama had only been posturing when he promised crowds of struggling Midwesterners during the campaign that he would renegotiate NAFTA, which facilitated the flight of blue-collar jobs to other countries. "NAFTA's shortcomings were evident when signed, and we must now amend the agreement to fix them," Obama declared. A few months after hiring Furman to help shape its economic policy, however, the White House quietly quashed any talk of renegotiating the trade deal. "The president has said we will look at all of our options, but I think they can be addressed without having to reopen the agreement," U.S. Trade Representative Ronald Kirk told reporters in a little-publicized conference call last April.
The announcement was not so surprising, given who Obama hired to serve alongside Furman at the NEC: management consultant Diana Farrell, who worked under Rubin at Goldman Sachs. In 2003, Farrell was the author of an infamous paper in which she argued that sending American jobs overseas might be "as beneficial to the U.S. as to the destination country, probably more so."
Joining Summers, Furman and Farrell at the NEC is Froman, who by then had been formally appointed to a unique position: He is not only Obama's international finance adviser at the National Economic Council, he simultaneously serves as deputy national security adviser at the National Security Council. The twin posts give Froman a direct line to the president, putting him in a position to coordinate Obama's international economic policy during a crisis. He'll have help from David Lipton, another joint appointee to the economics and security councils who worked with Rubin at Treasury and Citigroup, and from Jacob Lew, a former Citi colleague of Rubin's whom Obama named as deputy director at the State Department to focus on international finance.
Over at the Commodity Futures Trading Commission, which is supposed to regulate derivatives trading, Obama appointed Gary Gensler, a former Goldman banker who worked under Rubin in the Clinton White House. Gensler had been instrumental in helping to pass the infamous Commodity Futures Modernization Act of 2000, which prevented deregulation of derivative instruments like CDOs and credit-default swaps that played such a big role in cratering the economy last year. And as head of the powerful Office of Management and Budget, Obama named Peter Orszag, who served as the first director of Rubin's Hamilton Project. Orszag once succinctly summed up the project's ideology as a sort of liberal spin on trickle-down Reaganomics: "Market competition and globalization generate significant economic benefits."
Taken together, the rash of appointments with ties to Bob Rubin may well represent the most sweeping influence by a single Wall Street insider in the history of government. "Rather than having a team of rivals, they've got a team of Rubins," says Steven Clemons, director of the American Strategy Program at the New America Foundation. "You see that in policy choices that have resuscitated — but not reformed — Wall Street."While Rubin's allies and acolytes got all the important jobs in the Obama administration, the academics and progressives got banished to semi-meaningless, even comical roles. Kornbluh was rewarded for being the chief policy architect of Obama's meteoric rise by being outfitted with a pith helmet and booted across the ocean to Paris, where she now serves as America's never-again-to-be-seen-on-TV ambassador to the Organization for Economic Cooperation and Development. Goolsbee, meanwhile, was appointed as staff director of the President's Economic Recovery Advisory Board, a kind of dumping ground for Wall Street critics who had assisted Obama during the campaign; one top Democrat calls the panel "Siberia."
Joining Goolsbee as chairman of the PERAB gulag is former Fed chief Paul Volcker, who back in March 2008 helped candidate Obama write a speech declaring that the deregulatory efforts of the Eighties and Nineties had "excused and even embraced an ethic of greed, corner-cutting, insider dealing, things that have always threatened the long-term stability of our economic system." That speech met with rapturous applause, but the commission Obama gave Volcker to manage is so toothless that it didn't even meet for the first time until last May. The lone progressive in the White House, economist Jared Bernstein, holds the impressive-sounding title of chief economist and national policy adviser — except that the man he is advising is Joe Biden, who seems more interested in foreign policy than financial reform.
The significance of all of these appointments isn't that the Wall Street types are now in a position to provide direct favors to their former employers. It's that, with one or two exceptions, they collectively offer a microcosm of what the Democratic Party has come to stand for in the 21st century. Virtually all of the Rubinites brought in to manage the economy under Obama share the same fundamental political philosophy carefully articulated for years by the Hamilton Project: Expand the safety net to protect the poor, but let Wall Street do whatever it wants. "Bob Rubin, these guys, they're classic limousine liberals," says David Sirota, a former Democratic strategist. "These are basically people who have made shitloads of money in the speculative economy, but they want to call themselves good Democrats because they're willing to give a little more to the poor. That's the model for this Democratic Party: Let the rich do their thing, but give a fraction more to everyone else."
Even the members of Obama's economic team who have spent most of their lives in public office have managed to make small fortunes on Wall Street. The president's economic czar, Larry Summers, was paid more than $5.2 million in 2008 alone as a managing director of the hedge fund D.E. Shaw, and pocketed an additional $2.7 million in speaking fees from a smorgasbord of future bailout recipients, including Goldman Sachs and Citigroup. At Treasury, Geithner's aide Gene Sperling earned a staggering $887,727 from Goldman Sachs last year for performing the punch-line-worthy service of "advice on charitable giving." Sperling's fellow Treasury appointee, Mark Patterson, received $637,492 as a full-time lobbyist for Goldman Sachs, and another top Geithner aide, Lee Sachs, made more than $3 million working for a New York hedge fund called Mariner Investment Group. The list goes on and on. Even Obama's chief of staff, Rahm Emanuel, who has been out of government for only 30 months of his adult life, managed to collect $18 million during his private-sector stint with a Wall Street firm called Wasserstein-Perella.
The point is that an economic team made up exclusively of callous millionaire-assholes has absolutely zero interest in reforming the gamed system that made them rich in the first place. "You can't expect these people to do anything other than protect Wall Street," says Rep. Cliff Stearns, a Republican from Florida. That thinking was clear from Obama's first address to Congress, when he stressed the importance of getting Americans to borrow like crazy again. "Credit is the lifeblood of the economy," he declared, pledging "the full force of the federal government to ensure that the major banks that Americans depend on have enough confidence and enough money." A president elected on a platform of change was announcing, in so many words, that he planned to change nothing fundamental when it came to the economy. Rather than doing what FDR had done during the Great Depression and institute stringent new rules to curb financial abuses, Obama planned to institutionalize the policy, firmly established during the Bush years, of keeping a few megafirms rich at the expense of everyone else.
Obama hasn't always toed the Rubin line when it comes to economic policy. Despite being surrounded by a team that is powerfully opposed to deficit spending — balanced budgets and deficit reduction have always been central to the Rubin way of thinking — Obama came out of the gate with a huge stimulus plan designed to kick-start the economy and address the job losses brought on by the 2008 crisis. "You have to give him credit there," says Sen. Bernie Sanders, an advocate of using government resources to address unemployment. "It's a very significant piece of legislation, and $787 billion is a lot of money."
But whatever jobs the stimulus has created or preserved so far — 640,329, according to an absurdly precise and already debunked calculation by the White House — the aid that Obama has provided to real people has been dwarfed in size and scope by the taxpayer money that has been handed over to America's financial giants. "They spent $75 billion on mortgage relief, but come on — look at how much they gave Wall Street," says a leading Democratic strategist. Neil Barofsky, the inspector general charged with overseeing TARP, estimates that the total cost of the Wall Street bailouts could eventually reach $23.7 trillion. And while the government continues to dole out big money to big banks, Obama and his team of Rubinites have done almost nothing to reform the warped financial system responsible for imploding the global economy in the first place.
The push for reform seemed to get off to a promising start. In the House, the charge was led by Rep. Barney Frank, the outspoken chair of the House Financial Services Committee, who emerged during last year's Bush bailouts as a sharp-tongued critic of Wall Street. Back when Obama was still a senator, he and Frank even worked together to introduce a populist bill targeting executive compensation. Last spring, with the economy shattered, Frank began to hold hearings on a host of reforms, crafted with significant input from the White House, that initially contained some very good elements. There were measures to curb abusive credit-card lending, prevent banks from charging excessive fees, force publicly traded firms to conduct meaningful risk assessment and allow shareholders to vote on executive compensation. There were even measures to crack down on risky derivatives and to bar firms like AIG from picking their own regulators.
Then the committee went to work — and the loopholes started to appear.
The most notable of these came in the proposal to regulate derivatives like credit-default swaps. Even Gary Gensler, the former Goldmanite whom Obama put in charge of commodities regulation, was pushing to make these normally obscure investments more transparent, enabling regulators and investors to identify speculative bubbles sooner. But in August, a month after Gensler came out in favor of reform, Geithner slapped him down by issuing a 115-page paper called "Improvements to Regulation of Over-the-Counter Derivatives Markets" that called for a series of exemptions for "end users" — i.e., almost all of the clients who buy derivatives from banks like Goldman Sachs and Morgan Stanley. Even more stunning, Frank's bill included a blanket exception to the rules for currency swaps traded on foreign exchanges — the very instruments that had triggered the Long-Term Capital Management meltdown in the late 1990s.
Given that derivatives were at the heart of the financial meltdown last year, the decision to gut derivatives reform sent some legislators howling with disgust. Sen. Maria Cantwell of Washington, who estimates that as much as 90 percent of all derivatives could remain unregulated under the new rules, went so far as to say the new laws would make things worse. "Current law with its loopholes might actually be better than these loopholes," she said.
An even bigger loophole could do far worse damage to the economy. Under the original bill, the Securities and Exchange Commission and the Commodity Futures Trading Commission were granted the power to ban any credit swaps deemed to be "detrimental to the stability of a financial market or of participants in a financial market." By the time Frank's committee was done with the bill, however, the SEC and the CFTC were left with no authority to do anything about abusive derivatives other than to send a report to Congress. The move, in effect, would leave the kind of credit-default swaps that brought down AIG largely unregulated.
Why would leading congressional Democrats, working closely with the Obama administration, agree to leave one of the riskiest of all financial instruments unregulated, even before the issue could be debated by the House? "There was concern that a broad grant to ban abusive swaps would be unsettling," Frank explained.
Unsettling to whom? Certainly not to you and me — but then again, actual people are not really part of the calculus when it comes to finance reform. According to those close to the markup process, Frank's committee inserted loopholes under pressure from "constituents" — by which they mean anyone "who can afford a lobbyist," says Michael Greenberger, the former head of trading at the CFTC under Clinton.
This pattern would repeat itself over and over again throughout the fall. Take the centerpiece of Obama's reform proposal: the much-ballyhooed creation of a Consumer Finance Protection Agency to protect the little guy from abusive bank practices. Like the derivatives bill, the debate over the CFPA ended up being dominated by horse-trading for loopholes. In the end, Frank not only agreed to exempt some 8,000 of the nation's 8,200 banks from oversight by the castrated-in-advance agency, leaving most consumers unprotected, he allowed the committee to pass the exemption by voice vote, meaning that congressmen could side with the banks without actually attaching their name to their "Aye."
To win the support of conservative Democrats, Frank also backed down on another issue that seemed like a slam-dunk: a requirement that all banks offer so-called "plain vanilla" products, such as no-frills mortgages, to give consumers an alternative to deceptive, "fully loaded" deals like adjustable-rate loans. Frank's last-minute reversal — made in consultation with Geithner — was such a transparent giveaway to the banks that even an economics writer for Reuters, hardly a far-left source, called it "the beginning of the end of meaningful regulatory reform."
But the real kicker came when Frank's committee took up what is known as "resolution authority" — government-speak for "Who the hell is in charge the next time somebody at AIG or Lehman Brothers decides to vaporize the economy?" What the committee initially introduced bore a striking resemblance to a proposal written by Geithner earlier in the summer. A masterpiece of legislative chicanery, the measure would have given the White House permanent and unlimited authority to execute future bailouts of megaconglomerates like Citigroup and Bear Stearns.
Democrats pushed the move as politically uncontroversial, claiming that the bill will force Wall Street to pay for any future bailouts and "doesn't use taxpayer money." In reality, that was complete bullshit. The way the bill was written, the FDIC would basically borrow money from the Treasury — i.e., from ordinary taxpayers — to bail out any of the nation's two dozen or so largest financial companies that the president deems in need of government assistance. After the bailout is executed, the president would then levy a tax on financial firms with assets of more than $10 billion to repay the Treasury within 60 months — unless, that is, the president decides he doesn't want to! "They can wait indefinitely to repay," says Rep. Brad Sherman of California, who dubbed the early version of the bill "TARP on steroids."
The new bailout authority also mandated that future bailouts would not include an exchange of equity "in any form" — meaning that taxpayers would get nothing in return for underwriting Wall Street's mistakes. Even more outrageous, it specifically prohibited Congress from rejecting tax giveaways to Wall Street, as it did last year, by removing all congressional oversight of future bailouts. In fact, the resolution authority proposed by Frank was such a slurpingly obvious blow job of Wall Street that it provoked a revolt among his own committee members, with junior Democrats waging a spirited fight that restored congressional oversight to future bailouts, requires equity for taxpayer money and caps assistance to troubled firms at $150 billion. Another amendment to force companies with more than $50 billion in assets to pay into a rainy-day fund for bailouts passed by a resounding vote of 52 to 17 — with the "Nays" all coming from Frank and other senior Democrats loyal to the administration.
Even as amended, however, resolution authority still has the potential to be truly revolutionary legislation. The Senate version still grants the president unlimited power over equity-free bailouts, and the amended House bill still institutionalizes a system of taxpayer support for the 20 to 25 biggest banks in the country. It would essentially grant economic immortality to those top few megafirms, who will continually gobble up greater and greater slices of market share as money becomes cheaper and cheaper for them to borrow (after all, who wouldn't lend to a company permanently backstopped by the federal government?). It would also formalize the government's role in the global economy and turn the presidential-appointment process into an important part of every big firm's business strategy. "If this passes, the very first thing these companies are going to do in the future is ask themselves, 'How do we make sure that one of our executives becomes assistant Treasury secretary?'" says Sherman.
On the Senate side, finance reform has yet to make it through the markup process, but there's every reason to believe that its final bill will be as watered down as the House version by the time it comes to a vote. The original measure, drafted by chairman Christopher Dodd of the Senate Banking Committee, is surprisingly tough on Wall Street — a fact that almost everyone in town chalks up to Dodd's desperation to shake the bad publicity he incurred by accepting a sweetheart mortgage from the notorious lender Countrywide. "He's got to do the shake-his-fist-at-Wall Street thing because of his, you know, problems," says a Democratic Senate aide. "So that's why the bill is starting out kind of tough."
The aide pauses. "The question is, though, what will it end up looking like?"
He's right — that is the question. Because the way it works is that all of these great-sounding reforms get whittled down bit by bit as they move through the committee markup process, until finally there's nothing left but the exceptions. In one example, a measure that would have forced financial companies to be more accountable to shareholders by holding elections for their entire boards every year has already been watered down to preserve the current system of staggered votes. In other cases, this being the Senate, loopholes were inserted before the debate even began: The Dodd bill included the exemption for foreign-currency swaps — a gift to Wall Street that only appeared in the Frank bill during the course of hearings — from the very outset.
The White House's refusal to push for real reform stands in stark contrast to what it should be doing. It was left to Rep. Pete Kanjorski in the House and Bernie Sanders in the Senate to propose bills to break up the so-called "too big to fail" banks. Both measures would give Congress the power to dismantle those pseudomonopolies controlling almost the entire derivatives market (Goldman, Citi, Chase, Morgan Stanley and Bank of America control 95 percent of the $290 trillion over-the-counter market) and the consumer-lending market (Citi, Chase, Bank of America and Wells Fargo issue one of every two mortgages, and two of every three credit cards). On November 18th, in a move that demonstrates just how nervous Democrats are getting about the growing outrage over taxpayer giveaways, Barney Frank's committee actually passed Kanjorski's measure. "It's a beginning," Kanjorski says hopefully. "We're on our way." But even if the Senate follows suit, big banks could well survive — depending on whom the president appoints to sit on the new regulatory board mandated by the measure. An oversight body filled with executives of the type Obama has favored to date from Citi and Goldman Sachs hardly seems like a strong bet to start taking an ax to concentrated wealth. And given the new bailout provisions that provide these megafirms a market advantage over smaller banks (those Paul Volcker calls "too small to save"), the failure to break them up qualifies as a major policy decision with potentially disastrous consequences.
"They should be doing what Teddy Roosevelt did," says Sanders. "They should be busting the trusts."
That probably won't happen anytime soon. But at a minimum, Obama should start on the road back to sanity by making a long-overdue move: firing Geithner. Not only are the mop-headed weenie of a Treasury secretary's fingerprints on virtually all the gross giveaways in the new reform legislation, he's a living symbol of the Rubinite gangrene crawling up the leg of this administration. Putting Geithner against the wall and replacing him with an actual human being not recently employed by a Wall Street megabank would do a lot to prove that Obama was listening this past Election Day. And while there are some who think Geithner is about to go — "he almost has to," says one Democratic strategist — at the moment, the president is still letting Wall Street do his talking.
Morning, the National Mall, November 5th. A year to the day after Obama named Michael Froman to his transition team, his political "opposition" has descended upon the city. Republican teabaggers from all 50 states have showed up, a vast horde of frowning, pissed-off middle-aged white people with their idiot placards in hand, ready to do cultural battle. They are here to protest Obama's "socialist" health care bill — you know, the one that even a bloodsucking capitalist interest group like Big Pharma spent $150 million to get passed.
These teabaggers don't know that, however. All they know is that a big government program might end up using tax dollars to pay the medical bills of rapidly breeding Dominican immigrants. So they hate it. They're also in a groove, knowing that at the polls a few days earlier, people like themselves had a big hand in ousting several Obama-allied Democrats, including a governor of New Jersey who just happened to be the former CEO of Goldman Sachs. A sign held up by New Jersey protesters bears the warning, "If You Vote For Obamacare, We Will Corzine You."
I approach a woman named Pat Defillipis from Toms River, New Jersey, and ask her why she's here. "To protest health care," she answers. "And then amnesty. You know, immigration amnesty."
I ask her if she's aware that there's a big hearing going on in the House today, where Barney Frank's committee is marking up a bill to reform the financial regulatory system. She recognizes Frank's name, wincing, but the rest of my question leaves her staring at me like I'm an alien.
"Do you care at all about economic regulation?" I ask. "There was sort of a big economic collapse last year. Do you have any ideas about how that whole deal should be fixed?"
"We got to slow down on spending," she says. "We can't afford it."
"But what do we do about the rules governing Wall Street . . ."
She walks away. She doesn't give a fuck. People like Pat aren't aware of it, but they're the best friends Obama has. They hate him, sure, but they don't hate him for any reasons that make sense. When it comes down to it, most of them hate the president for all the usual reasons they hate "liberals" — because he uses big words, doesn't believe in hell and doesn't flip out at the sight of gay people holding hands. Additionally, of course, he's black, and wasn't born in America, and is married to a woman who secretly hates our country.
These are the kinds of voters whom Obama's gang of Wall Street advisers is counting on: idiots. People whose votes depend not on whether the party in power delivers them jobs or protects them from economic villains, but on what cultural markers the candidate flashes on TV. Finance reform has become to Obama what Iraq War coffins were to Bush: something to be tucked safely out of sight.
Around the same time that finance reform was being watered down in Congress at the behest of his Treasury secretary, Obama was making a pit stop to raise money from Wall Street. On October 20th, the president went to the Mandarin Oriental Hotel in New York and addressed some 200 financiers and business moguls, each of whom paid the maximum allowable contribution of $30,400 to the Democratic Party. But an organizer of the event, Daniel Fass, announced in advance that support for the president might be lighter than expected — bailed-out firms like JP Morgan Chase and Goldman Sachs were expected to contribute a meager $91,000 to the event — because bankers were tired of being lectured about their misdeeds.
"The investment community feels very put-upon," Fass explained. "They feel there is no reason why they shouldn't earn $1 million to $200 million a year, and they don't want to be held responsible for the global financial meltdown."
Which makes sense. Shit, who could blame the investment community for the meltdown? What kind of assholes are we to put any of this on them?
This is the kind of person who is working for the Obama administration, which makes it unsurprising that we're getting no real reform of the finance industry. There's no other way to say it: Barack Obama, a once-in-a-generation political talent whose graceful conquest of America's racial dragons en route to the White House inspired the entire world, has for some reason allowed his presidency to be hijacked by sniveling, low-rent shitheads. Instead of reining in Wall Street, Obama has allowed himself to be seduced by it, leaving even his erstwhile campaign adviser, ex-Fed chief Paul Volcker, concerned about a "moral hazard" creeping over his administration.
"The obvious danger is that with the passage of time, risk-taking will be encouraged and efforts at prudential restraint will be resisted," Volcker told Congress in September, expressing concerns about all the regulatory loopholes in Frank's bill. "Ultimately, the possibility of further crises — even greater crises — will increase."
What's most troubling is that we don't know if Obama has changed, or if the influence of Wall Street is simply a fundamental and ineradicable element of our electoral system. What we do know is that Barack Obama pulled a bait-and-switch on us. If it were any other politician, we wouldn't be surprised. Maybe it's our fault, for thinking he was different.
Friday, December 4, 2009
Read the Daily Bell and you know. Intelligent and knowledgeable information on the Monetary Elite? BS? Read and be amazed of the totally different view on world event. Highly recommended to subscribe and to read evey morning their view points from a Libertarian perspective.
Dubai Debacle Offers Power Elite Window?
Uber bear investor and Gloom, Boom and Doom Report editor Marc Faber (pictured left) says Dubai World's debt problems are just the tip of the iceberg, and suggests investors will be better off not buying U.S. government bonds. "In the context of all the default that will happen in the world, it (Dubai) is not a big thing," Faber told Bloomberg. "But it's a reminder that governments can default." The 3.3 percent investors currently earn on U.S. bonds will likely be lost to dollar depreciation over time, Faber notes. Moreover, if deflation occurs, "much more money will be printed" and stimulus packages will cause government debt to rise. "Eventually, I suppose a lot of governments will be bust, including the U.S.," Faber says. "Nothing has been resolved, it's just being postponed...The ultimate crisis will not just bankrupt the banking system and financial as happened in 2008, it will bankrupt governments." "I think the upside potential for U.S. bonds is extremely limited." New York Investing Meetup founder and market trader Daryl Montgomery calls the Dubai default "merely the latest episode in the unwinding of a global real estate glut." - MoneyNews
Dominant Social Theme: Don't look at the man behind the curtain.
Free-Market Analysis: We've been reporting on a potential commercial real-estate unwinding for some time now, but quite predictably, the Dubai mess is not being covered as part of that larger story. Or not until Marc Faber puts it in perspective for us. Dubai has been covered, predictably, as part of a "stupid-Arabs-get-what-is coming-to-them" story. And we covered it most recently as a story that revealed once again a power-elite Hegelian dialectic.
The concept, we explained at the time, was that the West (the Anglo-American axis) attacked various Muslim countries overseas with the idea of making the leaders and populations of those countries more amenable to Western markets and corporations. But that's only one side of the strategy. A second argument is needed and that's where Dubai and the Arab Emirates in general fit into the picture. The other effort must be to present another alternative. Dubai was that other alternative, a Westernized Arab state, complete with glitz and glamour that even the West itself cannot offer.
Thesis (war), antithesis (Dubai) and then a grand synthesis somewhere in between. Much has been made of the argument that the invasion of the Middle East launched by then President Bush was a war for oil. But this does not in any way explain Afghanistan. Nor does the initial run-up to war which, as we have pointed out previously, featured an "Al Qaeda" that a major BBC documentary labeled a "fantasy."
If Al Qaeda didn't exist (or certainly not as it does now after eight years of war has apparently cultivated it) then what was the reason for attacking Afghanistan and Iraq (and by proxy Iran)? We would argue that the West is once again embarking on nation-building with an eye toward Westernizing Muslim populations around the world. It is the Muslim world that remains (outside of Africa) the most un-Westernized element of global society. It is difficult to have one world, when two billion of the world's citizens are not only not Westernized, but also don't believe in Western values or culture.
So that's what's going on in our humble opinion. People get exercised about the "Islamization" of Europe - but that's part of the idea as well, in our estimation. Muddle up cultures and get those involved with Islam more involved with Europe. Come up with a grand synthesis of East and West - including a variant of Sharia law if necessary - in order to complete the merger between Islam and the West. And then make damn sure that the Western power-elite is ultimately in charge of the merger.
As far as the real-estate crunch goes, Faber is dead on in our opinion. The next leg of the economic crunch is going to see big real estate going for pennies on the dollar. Dubai itself will be declared dead - as it already has by some in the investment world. But from our point of view that's no sure thing.
In fact the entire economic crunch has to be seen in terms of a dialogue between the power elite and its dominant social themes and free-market thinking. Free-market thinkers, in our estimation, are well aware of this dialogue as well as what constitutes free-market economics. Thus, free-market thinkers will have to figure out if they want to bet on the power elite or the free market this time around.
That's why you read the Bell, after all, dear reader. You knew there was more to it than vague allegations about a monetary or power elite. And there is! In actuality, the Bell paradigm is an investment paradigm. You've probably been investing this way all along - trying to figure out if this economic circumstance or that one is an economic reality or just a false alarm.
Questions to consider as a result of the Faber article, excerpted ... Are we going to have a great depression? Is gold going to US$8,000? Are Green investments worthwhile? Does Climate Change exist? Is the real-estate crunch going to render commercial properties around the world worthless? How about stocks and bonds? Will there be another bond crash as well? Are Treasuries still a good thing to buy and hold?
See, you're constantly making these choices anyway as an investor. The only difference is now you can put a face to a theme. Now you may come to understand (if you didn't already) that much of the investment conversation around you is not amorphous or evolutionary. From our point of view the investment dilemmas in the world are for the most part promotions. Fiat money is a promotion. Central banking is a promotion. Even real-estate valuations are, in some sense, a promotion.
The question to ask is not WHETHER these are promotions (they are, in our opinion). But whether or not they are going to be SUCCESSFUL. Climate change, an obvious promotion, is having a tough go right now. So do you, as an investor, wish to invest heavily in green solutions? If you do, you are making a bet that the Power Elite is going to pull it off, well enough anyway for green sectors of the economy to succeed.
We have stated in these pages recently that climate change is currently on its last legs as a promotion, but we also admit that the Power Elite is very powerful and convincing. It may be that climate change continues to be a viable promotion, or that it is promoted no matter the reception - flogged throughout these trials and tribulations. Then you, as an investor, have to choose. Not us ... you.
No, we won't choose for you! We have our beliefs about the reality and morality of all this, but ultimately it is up to the individual to figure it out. If you accept the conversation that is going on, if you are alert to the promotions - peak oil, climate change, swine flu, overpopulation, Islamofascism - then you are in a much better position to decide whether or not you think they (individually, or in aggregate) will be successful. If you believe they will be successful, and you want to make money, then position yourself in such a way as to take advantage of them!
Isn't that cynical, you may ask. Well, yes. But we are not writing of morality here but investing. Are the themes and their promotion ultimately detrimental to humankind and civil society? Well, yes. But we are not discussing current events from a philosophical standpoint. We are simply providing you, dear reader, with a way of evaluating your portfolio. But a more informed one.
Conclusion: Understand this greatest of all modern conversations - the elite's dominant social themes versus the free-market - and the world will fall into place for you. Not only will you not be mystified by the way the world works anymore, you will also find yourself beginning to predict what's going to come next! It is a feeling both exhilarating and depressing at the same time. We know, for we have experienced it.
Monday, November 30, 2009
The deliberate and total destruction of the American middle class by Wall street banks, assisted by US politicians, is real.
Finally people are starting to fight back:
i. stop using your credit cards;
ii. withdraw all you money from banks and put it in an account of a community bank;
iii. 401 (K)'s should be placed in a roll over account which holds physical gold and silver.
iv. stop paying your 401 (K)'s and buy instead gold and silver
v. stop paying your debt.
The FDIC, the agency that insures the nation’s $4.8 trillion on deposit with banks, recently reported that it is out of money. The FDIC has no funds to back its promise to insure up to $250,000 of the money in banks in checking, NOW, and savings accounts, money market deposit accounts and certificates of deposit. Our “insurance” is an unfunded promise.
But that’s only half of the story. The FDIC didn’t have the money they said they had to begin with! As reported by Sprott Asset Management in its October report, “Dead Government Walking,” “the real shocker . . . is that the FDIC ‘funds’ were never even held in a segregated bank account -- the fees collected from the banks are accounted for as a part of the government’s general revenues that go towards military spending bailouts, interest costs and other government programs. The FDIC ‘fund’ merely consisted of IOU’s from the general revenues accounts.” Imagine that! Just like Social “Security”! The Social Security Administration doesn’t hold the social security funds it collects in a segregated, dedicated account, either. The government spends every penny and provides the SSA with IOU’s from a “Treasury” that is empty and hell-bent on borrowing even more! Like the FDIC’s “insurance,” our retirement benefits are unfunded.
In the world of private commerce, collecting funds with a promise to provide insurance or retirement benefits and not holding, investing and using the funds for that purpose, but spending every cent on every passing fancy like, say, adventures in reforming governments abroad, would constitute fraud and a breach of fiduciary obligation. Clearly, the US is no trustee or fiduciary of the people. When companies like General Motors or Northwest Airlines go bankrupt and leave their workers with billions of unfunded retirement benefits, people think it is unconscionable that the companies did not fund their employees’ retirement benefits and wonder how the laws of this country can permit such a thing. When the government does it, it’s -- what exactly? -- just fine? It’s not as though we can fix it by voting for someone new. The money’s gone and the only source for replenishing the funds is -- us. There’s no one to sue to recoup losses for mismanagement or waste, and in any event it’s not a breach of contract or a crime. In other words, there’s absolutely no accountability, and we’ve been impoverished. Lolz, aren’t we the suckers! What a scam! We’ve been completely rolled! And the government’s only “solution” is — let’s go double or nothing!
That people believe programs like the FDIC or Social Security provide a genuine “safety net” is a testament to the phenomenal power of magical thinking, and our own ability to delude ourselves. The reality is that the government is under no constraint to dedicate the funds collected to the purpose for which they were supposedly taken, but can spend every cent on anything it likes. Its supposed “commitment” to insure our deposits or to pay retirement benefits, therefore, is nothing more than a promise that, after it takes all the funds we have already provided for insurance or our retirement and spent them on something else, it will take even more from us to supply the funds it still needs to pay those promises which, of course, will also not be dedicated to the purpose for which they are taken but can be used for any purpose whatsoever. Its “promise”, in other words, is nothing more than a commitment to progressive impoverization.
The vaunted “safety net” is not a true, actuarial-based insurance fund administered by a trustee or fiduciary who is responsible to hold, invest and use the funds for a dedicated purpose, but is nothing but an IOU backed with zero assets, whose payouts are based solely upon the power to keep taking ever more from us until there is nothing left to take. Because the “safety net” is, by design, unfunded, its real function and purpose is to serve as a moral justification for unlimited expropriation for any purpose. “Oh, sorry, the money’s gone! Yes, in retrospect maybe we were unwise or irresponsible and wasted it, but we still have this noble purpose, we can’t abandon people now, so empty your pockets and send more so we can ‘protect’ you.” Wooo-ee! Here we go again! Double or nothing!
As an aside, you can see that the idea that we must have programs like Social Security and can’t “allow” people to keep their money and provide for their own retirement because they will just spend it all is completely meritless, a straw man. The people could not be more irresponsible than the government itself is with these funds — it blows every penny! Its “savings” plan, its “self-discipline,” is to spend it all and then take more as needed.
Along with national defense, providing “social insurance” is one of the principal grounds of legitimacy of modern government yet, like “national defense”, which principally involves waging wars of aggression abroad, these programs are complete frauds. You find out just how illusory it all really is, and how you were completely played for a sucker, after the money’s gone. If previously you have been a supporter of the idea of “government as social insurance provider,” let me suggest here that you admit to yourself — and then finally act upon — what would be obvious if you were dealing with anyone besides this mythic, magical thing called “government”: People who perpetrate fraud against you do not really have your best interests at heart. Not even when they say over and over that they do, or that they went into politics to Help People and because They Care. Not even when they promise that if you vote for them and give them a little more time to fix things and give their party a bigger majority they’ll make everything right and transform the world into the Beautiful Vision in Your Mind. With the exception of a very small handful of men of principle whose actions have long corresponded with their words, like Ron Paul or Dennis Kucinich, they should be treated as the lying, thieving reprobates, snake oil salesmen, sponsors and procurers of the police state at home and destruction, expropriation and murder abroad that they are, and certainly shouldn’t be dignified with titles such as “Representative,” “Senator,” or “President.”
By far the biggest confidence game, and the one on which they all depend, is the Federal Reserve’s fiat dollar, a paper IOU backed by zero assets and subsisting on nothing more than pure trust and our own continued willingness to play “let’s pretend.” Confidence (fraudulently obtained and fraudulently maintained, to be sure, but confidence nonetheless) is the fuel that keeps the entire corrupt system going. We need to withdraw that confidence, completely.
As a store of value, the Federal Reserve’s dollar is useless. It has declined over 95% in value since the Federal Reserve’s creation in 1913, and the Federal Reserve is currently actively engaged in driving it even lower. Money “saved” loses value, even when placed in banks to earn interest. Ever wonder why the banks do not pay any real amounts in interest on your deposits, why it never even covers cost of living increases? It’s because banks don’t really need the money in order to make loans. By making unlimited quantities of credit available to banks with the push of a button at zero interest or 25 basis points, the Federal Reserve has made our deposits unnecessary to banks and essentially worthless as a means of making money, so that we cannot even earn interest on our money sufficient to offset the decline in its value. The ability of banks to obtain cheap, unlimited credit from the Federal Reserve actually prevents your money from participating in the making of money. The Federal Reserve shunts you out of growth of your money through savings and investment because it can always provide vast sums of credit more cheaply than either depositors or investors.
With (i) an inability to earn sufficient interest on savings with banks, (ii) securities regulations that create large entry barriers to raising capital and which favor large companies and wealthy investors and preclude the creation of local or regional exchanges where small investors can provide funds to start-up businesses in their communities or regions and trade their securities, and (iii) tax incentives to put our funds into withdrawal-penalized IRAs and 401(k)s, our savings are herded into mutual funds as the one means open to us to earn money on our money. There, too much money chases too few stocks, because the Federal Reserve’s unlimited supply of cheap credit also makes stock irrelevant. Companies almost never issue publicly-traded stock to raise capital for their businesses. First, companies can get credit from banks via the Federal Reserve cheaper, easier and with lower transaction costs than they can get it publicly from investors. The Federal Reserve undercuts public investment in favor of financial institutions. Second, the payment of interest on debt is a deductible expense for income tax purposes, but dividends (payments on capital) are not, so that the after-tax cost of debt is even less than the nominal interest rate.
As a result of these huge structural biases toward debt financing, there is a very limited supply of publicly traded stocks in which to invest. Too many investment dollars chasing too few stocks results in overvalued stocks, whose price no longer reflects the fundamental underlying value of a percentage ownership interest in the company, but instead is a “bubble” reflecting (i) the momentary relative demand for the shares among the pool of largely captive investors (“captive” because people who have put their funds into IRAs and 401(k)s face very high extraction costs), and (ii) the amount of credit available to banks and other speculators and traders seeking to profit from short-term price swings in the stock. Providing zero interest credit to banks to trade in securities, as the Federal Reserve is currently doing, further inflates bubble prices to reflect the surfeit of credit available to the speculators playing with these chips, rather than any underlying real value of the securities.
The result of all of these factors is that the stock’s price (having ceased to have much to do with its real underlying value) is susceptible to huge, rapid increases and declines that, again, do not necessarily correspond to any change in the company’s actual business or prospects, but instead reflect credit expansion or contraction and the activities of short-term traders and speculators seeking profits. As a result of the bust last year when, practically overnight, the Dow Jones Industrial Average fell almost 34% and the S&P 500 Index fell about 38%, we all know now that the advice we were given long ago that we should just put our money in stocks and forget about it until retirement (“Over the long run, you will make money!”) was effectively sheer BS designed to get us to put money into what are really high-risk assets. Thanks to the massive price inflection risk caused by massive underlying fiat credit, speculative trading and churning for trading and management fees, this is a high-stakes game rigged for speculators, traders and mutual fund managers, and is certainly not a game anyone should be playing with funds they will need to live in their old age. And yet, this is the corral into which our savings are driven by our government’s policies.
We are never going to have a government that is constrained by economic reality until it is forced to use and reckon in sound money, and not in a fiat currency that can be created out of thin air completely unconnected to, and unlimited by, the real economic value of assets or productive capacity. We are never going to be able to save funds that have any lasting value, or grow our savings through a return in the form of interest or through real public investment opportunities under the current system. It is time for us, the people, to do our own trust busting, to bring down these huge financial institutions, including the Federal Reserve, and the oligarchy that transform our savings into chips in a global financial casino and transform us into tax and debt slaves. We can do it, and we don’t need the politicians.
It hasn’t received anywhere near the attention it deserved, or prompted the sustained action it warrants but, shades of Howard Beale!, on October 21, something pretty significant happened. Someone in the “main stream media” went beyond the formulaic, toothless recommendations to “contact your representatives in Washington and demand that they do something” and called for direct action. MSNBC financial commentator Dylan Ratigan recommended that we stop helping the nation’s largest banks gamble with our money and make record profits off of taxpayer funds by (i) taking all of our funds out of the largest banks and moving them into community banks, (ii) using cash as much as possible, and (iii) stop using our credit cards. He actually urged self-help to stop the pillage of our wealth and our future.
Unfortunately, he is not as radical, yet, as he could be, because he seems to still believe it is possible to get Washington to work for the people. In the same October broadcast in which he called for direct action, he also urged that we write and complain to our representatives. Again, on November 16th, he hosted a discussion of the need for people to burn up the phone lines with their anger and come to Washington to protest so that their representatives start “getting it” and pass legislation to protect the people.
Now, just let the bitter implications of that suggestion sink in for a moment. Our “representatives” don’t know what serves our interests, that is, they can’t perceive it by putting themselves in our position, or do and won’t act on it, but need to hear from us in large numbers, with impassioned voices, and we actually have to go to Washington and provide a visual demonstration to them of how important this is to us, before they will stop doing the bidding of the lobbyists who provide funds for their campaigns and actually represent us. Hmmm, maybe we have a far bigger systemic problem here than can be addressed by phone calls, emails and bus trips to Washington.
Mr. Ratigan, give up this last vestige of hope in our utterly corrupt political system, so you can more fully throw yourself into the work that actually needs to be done!
“Burning the phone lines,” and protests in Washington aren’t going to accomplish anything. Calls to Washington opposing TARP were running close to 400 to one against, and Congress passed it anyway. When people in France take to the streets it has some effect because they are really teed off and “communicate” this by burning cars, smashing things, bringing public transit or truck deliveries to a halt or shutting down parts of the city. When people in France take to the streets, it still recalls to the minds of their elected representatives a time 220 years ago when members of the ruling class were guillotined in those very streets, and tens of thousands of aristocrats and clergy had to flee their country and leave their estates behind to avoid a similar fate. When Americans “take to the streets” in Washington we have, what, exactly? Picnics on the Mall, family outings with the kids, people listening to fiery speeches from activists and celebrities, protest songs from popular singers and maybe memories of free love from the 60s? Oh, how they tremble in the halls of Congress!
Meanwhile, over at Huffington Post, to take it as but an example of the supplicant form of “activism” that is prevalent and accepted among polite society, we are treated to earnest blog entries explaining the steps that our government should be taking to help us, as if our “representatives” were people of good faith who really want to help us but just need it carefully explained to them so they know what to do. Or we are treated, in “Bearing Witness 2.0,” to tales of people who are suffering from the financial crisis or our health care system, as if appeals to compassion and conscience will trump the built-in dictates of the system.
Expecting to bring about reform by pushing for “change” in the next election, reporting the horrendous consequences of failed government polices, “speaking truth to power,” petitioning Congress, protesting — tell me again, what is the definition of “insanity”? The American progressive agitating for “change” is the very incarnation of the hapless, inept George Constanza, who badly needs to have an epiphany and start doing the opposite.
The Barons at Runnymede were not petitioning their government. Magna Carta, the great font of Anglo-American law that secured liberty from 1215 until the latter part of the 20th Century, was not obtained by begging for it. It is time to take direct action to bring the entire corrupt, central banking, fractional reserve, fiat currency system down. It is time, not for us to go to Washington, but to create so much financial havoc that our “representatives” come to us, begging us, with the entire edifice crashing down around them, for the chance to represent and serve us. It is time to engineer the downfall of the oligarchy that controls our government, so that all the financiers who created this crisis lose their jobs and flee to their offshore fortresses of solitude to enjoy some permanent time off with their ill-gotten gains. There, they can begin plotting anew how, after a few generations, when the world has forgotten the lessons of the current crisis, their grandchildren or great grandchildren can regain control of the world’s financial system and governments. That is the plan we need.
Dylan Ratigan has the right idea, but I don’t believe he takes it far enough. People with far more knowledge and insight into the workings of the current financial system than I currently have are needed to help plan this downfall, and many are needed to spread the word, but we should build and start acting now on Dylan Ratigan’s proposal.
Please note that in what follows, I am not rendering investment advice. I am not talking about a plan to protect or preserve your wealth or to profit in this crisis, or the actions you can take as a solitary individual to assist you and your family to weather this storm. I have no idea whether the actions recommended below will preserve or increase your wealth. In what follows I am talking about a grassroots uprising, a communal undertaking, to bring an end to the corrupt money system that rules and ruins our lives. At its utmost reaches, it is a scorched earth plan, and it would cost us, dearly. However, I believe that if we do not act now, we will simply face an even greater consolidation of power over us, and will be reduced even further into tax and debt peonage.
Herewith the Plan. None of it is illegal. Yet.
1. According to Bernie Sanders, the four largest banks in America — JP Morgan Chase, Bank of America, Wells Fargo, and Citigroup — now issue two-thirds of all credit cards and hold 40% of all bank deposits in the country. As Dylan Ratigan suggested, and we should keep suggesting and urging people to act upon, everyone who is a depositor in any these banks or any other large or regional bank should take all of their money out of those banks, terminate the accounts and open new accounts in small community banks and credit unions, and people should stop using their credit cards.
2. We should take, and keep, as much money out of the banks, all banks, as possible. Use cash to pay all local merchants and stop using your debit card. When CDs come to term, do not renew them, but withdraw the funds. In that community bank account you establish, leave in, or deposit when needed, only enough money to cover checks or bills you pay electronically and monthly fees, with a cushion against errors. Because banks have only a small fraction of the amount people have in deposits, and so many payments are made by digital account entries, taking our money out of banks en masse may force the Federal Reserve to actually have to print money, so that we can hold it in our hot little hands, and may actually force paper money into system. It will also decrease bank reserves and create bank instability, if not actual bank closings.
3. All amounts of long-term savings withdrawn from banks (i.e., not the cushion you keep for unexpected events or planned-for future expenses, like those new tires you are going to need for your car in a few months) should be used to purchase physical gold or silver. By doing this, you affirm that you want a currency that more than mere scrip that allows you to purchase current goods and services, but serves as a long term, stable store of value, is tied to some underlying commodity and independent measure of value that trades freely and therefore reflects real market or economic value, and is not subject to manufacture out of thin air or ready manipulation. For every ounce of gold or silver that you buy, you cast a vote of no confidence in the US dollar and the US government far more powerful than any vote you can cast for or against any politician and directly challenge the corrupt, manipulative central banking fiat money system that is destroying the middle class, destroying your wealth, reducing the value of your labor and condemning you and your children to perpetual debt and tax servitude.
As mentioned above, there are about $4.8 trillion in deposits in banks. The goal is to get as much of this into our hands as physical dollars for current or short-term needs and as much of our long-term savings into physical gold and silver as possible. If we can move sufficient amount of our funds permanently out of the largest banks, even the too-big-to-fails may tumble, and the system the oligarchs have set up for themselves might implode. In pursuing this goal we will not be alone. If we can move enough of our deposits into gold and silver, the world will see that even the American people are rejecting their worthless currency and have no trust or confidence in the fiat dollar or their government, and would join us in an exodus from dollars that may well overwhelm the capacity of central banks to control.
From a purely personal perspective, thus far, there is little cost to these actions, other than the necessity of continually managing your cash needs to avoid credit and debit card transactions and to keep your bank balance as low as possible, and the transaction costs of purchasing bullion, which seem to run generally from 5 to 7 percent. That will be an expense that has to be recouped before you begin “profiting” from owning bullion. Of course, there would be personal costs associated with actually succeeding in bringing about a collapse of the banking system, somewhat unquantifiable! You will also need to make appropriate preparations for those.
Now let’s deal with funds in IRAs and 401(k)s. It is difficult to obtain current information but, based on information compiled by the New York Times from data supplied by the Employee Benefit Research Institute and presented in an article on October 31st, it appears that, shortly after the market crash in 2008, there was approximately $3.7 trillion in IRAs and approximately $2.7 trillion in 401(k)s, or $6.4 trillion in retirement savings. Let’s address what we can do with these.
4. Funds from previous employment in rollover IRAs or in 401(k)s that are in former employer plans because you didn’t roll them over into your own IRA can be taken out of stock and bond funds and placed in a new qualified rollover account which holds physical gold and silver.
Generally, creating a gold and silver rollover account can be done with relatively minimal cost, but check carefully before you act because in some cases you will be charged fees for taking money out of your existing stock or bond funds. You are definitely going to lose anywhere from 5 - 7% of your funds in transaction fees to acquire bullion, unless you can make a very large purchase. However, because of the large amount of funds in rollover accounts that can be rolled over into bullion accounts, this action would be a massive vote of no confidence not only in the central banking, fiat currency system, but also in the rigged, captive investment, mutual fund stock market system, as people made it clear they will no longer put their savings into a relatively closed and limited pool of securities whose underlying prices bear little to no real relationship to the underlying economic value of the companies that issue those securities.
I caution again that I am not giving investment advice here, but describing a tactic to take down the existing corrupt financial system. I have no idea whether this will make you “better off” financially. The more people who do this, the more the price of gold and silver will rise, and the value of the dollar decline. But do not make the mistake of thinking that gold and silver have some inherent value immune from the relativity that affects all other assets. They do not. Should the entire fiat dollar system implode, there may well be massive deflation in the prices of assets, as the portion of asset prices attributable to the massive underlying credit disappears into thin air. In such a scenario, gold and silver prices may readjust downward as well, to a level below the amount you paid to acquire them, to reflect their real purchasing power. This is not a plan to make money, but to eliminate a corrupt system that consigns us to the status of mere consumers and renders us incapable of accumulating any of our own wealth or making any genuine returns on our own money, and reduces us to debt peonage. War is hell, and it is not going to be cost-free.
There are at least three other steps we can take, but each of them will involve even greater personal costs.
5. Cease contributing funds to IRAs and 401(k)s and use the available after-tax funds to purchase gold and silver. You will pay more in taxes, but you will stop feeding the asset bubbles in securities, undermine the Wall Street traders and money managers that make their profits from trading these inflated assets and managing mutual funds and further undermine the dollar with your purchases of bullion.
6. Withdraw funds from IRAs and 401(k)s and use the after-tax proceeds to buy gold and silver.
This one will really hurt. Amounts withdrawn from these accounts prior to age 59-1/2 are subject to a 10% tax penalty (except in limited cases) and are also subject to income tax, so taking any funds out of these accounts prior to that age and while you are still earning income from employment and subject to high tax rates will cost you. The 10% penalty is imposed to prevent you from taking your money out before retirement and blowing it all, like, you know, the government does. Depending on your federal and state tax brackets you could easily lose up to 50% of the total amount you take out. This tax burden effectively dissuades most people from withdrawing their funds, even in the face of huge swings in the market and huge uncertainty about the future value of their stock and bond investments. It would be quite costly, personally, but a large-scale termination of these accounts would massively deflate the value of stocks and other securities and the use of the after-tax funds to purchase gold and silver would further strike a huge blow against the fiat dollar.
7. Finally, the “nuclear option” — a large-scale permanent default on payment of personal debt.
This would be a complete refusal to pay any amount owed to lenders until part of the debt is written off and the financial system is completely reformed. People in some debtor nations that are in extremis, like Iceland and Latvia, are talking about this. The underlying justifications for a write-down are:
(a) morally, no person may own another, and it is as wrong to accomplish this by reducing people to debt peonage as it is to seize them and subsequently buy and sell them outright;
(b) economically, the central bank, fractional reserve banking system, in possession of a legally-created monopoly on credit by virtue of legal tender laws that require people to use the central bank’s currency, permits credit to be created out of thin air with the push of a button in amounts both untethered and unrelated to the real economic value of assets or productive capacity (the necessary implication of any fractional reserve system that is untied to any physical commodity the price of which is difficult to manipulate (such as gold) and has no real upper bounds), resulting in asset prices that reflect, not underlying economic reality, but the surfeit of underlying available credit, and it is necessary to deflate this artificial bubble inflated by the rent-seeking behavior of financiers so that people can again engage in real economic transactions on the basis of economic reality, and the real economy can again begin to thrive, and
(c) legally (although an argument that is unlikely to be accepted in any court of law), unlimited credit made available at artificial interest rates (interest rates produced by a central bank under legal tender laws inherently cannot reflect any “real” cost of money because central banks can literally create infinite supplies of credit by simply commanding it into existence) and lowered credit standards result in inflated asset prices that are far more a function of artificially created mass demand fueled by limitless cheap credit than the underlying economic value of assets, amounting to both price manipulation and “fraud in the inducement” by financial institutions, entitling debtors to damages or to vitiate their contracts.
Reform in America would mean, at a minimum, that all the people who helped create the crisis are out of all positions of power in government and replaced with people who saw it coming and understand why it happened, ending the Federal Reserve’s power to create credit, print money and act as lender of last resort, auditing it and putting it into receivership for liquidation, repeal of legal tender laws (so that people can freely use whatever currency they believe is the soundest and best store of value), repeal of the utterly disastrous Gramm-Leach-Bliley Act to re-separate commercial banking from investment banking, prohibition of sales of loans originated by commercial banks to a secondary market (banks will be far more careful lenders if they know they are the ones stuck holding the mortgage), and either elimination of all tax advantages that favor debt over equity, or grant of corresponding tax advantages to equity investment.
Large-scale, intentional default on all debt payment to lenders would be a fatal blow to the financial system. The goals are worthy, and should be the goals we have. Unfortunately, I suspect that the strategy of mass default as a means of achieving those goals is one of those shimmering visions like the syndicalist idea of the General Strike: absolutely awe-inspiring in its potential power and perfectly correct in theory, but near-impossible to actualize because of the degree of social cooperation needed to pull it off. I mention it principally to suggest we not be sidetracked by it but instead proceed immediately to do as much as possible with the readily available actions.
If Americans ever hope to have a government that is fiscally responsible and reflects the government we can actually afford, we have to take away its ability to play with monopoly money and force it to base its decisions on the much more limited supply of a sound currency that is rooted in economic reality and not in the rent-seeking activities of financiers. The political process is completely broken, captured by financial interests and utterly corrupt. The time has come for Americans to abandon “hope” in “change” coming from that quarter and do some trust-busting on their own. Écrasez l’infâme! Let’s get to work!
Friday, November 27, 2009
Was: Iconic building
Now Is: Moronic building
Don't worry, the financial engineers (the guys who caused the financial crisis) know what they are doing and are in charge of everything.
Please go back to bed and have trust in the Wall Street, cheap credit and our financial leaders. They will do EVERYTHING possible to get us back to the malls.
Dubai debt move 'carefully planned': top official
Dubai's move to suspend payments on its Dubai World conglomerate's debt was "carefully planned" and done in full knowledge of how the markets would react, the chairman of the Supreme Fiscal Committee said on Thursday.
"Our intervention in Dubai World was carefully planned and reflects its specific financial position," Sheikh Ahmed bin Saeed al-Maktoum said in a statement.
"The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react. We understand the concerns of the market and the creditors in particular.
"However we have had to intervene because of the need to take decisive action to address its particular debt burden."
However, Sheikh Ahmed insisted that "unprecedented growth, in Dubai and across the (United Arab Emirates), over the past decade has helped lay the foundation for what is now a broad-based sustainable economy beyond just natural resources."
Wednesday, November 25, 2009
One of the Champions of Cheap Credit: From Icon To Moron or from Hero to Zero.
Bubble apparently to pop soon.
Owner Waterfront Cape Town Going Bust?
Nov. 25 (Bloomberg) -- Dubai World, the government-owned holding company struggling with $59 billion of liabilities, is seeking to delay repayment on all of its debt, even after Abu Dhabi banks provided $5 billion for Dubai’s support fund.
Dubai World will ask all creditors for a “standstill agreement” as it negotiates to extend the maturities of its debt, including $3.52 billion of Islamic bonds due for repayment on Dec. 14 by its property unit Nakheel PJSC, the builder of Dubai’s palm tree-shaped islands, the company said in an e- mailed statement today.
The cost to protect against a default by Dubai surged 111 basis points to 429 basis points, ranking it the sixth highest- risk government borrower, according to credit-default swap prices from CMA Datavision in London. The contracts, which increase as perceptions of credit quality deteriorate, are now higher than Iceland’s after climbing 131 basis points in November, the biggest monthly increase since January.
The emirate, home to the world’s tallest tower and the biggest man-made islands, owes $4.3 billion next month and another $4.9 billion in the first quarter of 2010 through government and corporate debt, Deutsche Bank AG data show. Abu Dhabi government-controlled banks, National Bank of Abu Dhabi PJSC and Islamic lender Al Hilal Bank bought all $5 billion of bonds from the government, Dubai’s Department of Finance said in an e-mailed statement today.
“The Dubai Financial Support Fund, working with the chief restructuring officer, will start to assess and evaluate the extent of the restructuring required,” the Dubai Department of Finance said in a statement. “As a first step, Dubai World intends to ask all providers of financing to Dubai World and Nakheel to ‘standstill’ and extend maturities until at least May 30.” The price of Nakheel bonds dropped to 80 percent of face value.
Dubai will draw down $1 billion from the bonds sold to Abu Dhabi to provide funding through a sale of securities to National Bank of Abu Dhabi PJSC and Islamic debt, or sukuk, to Al Hilal.
Dubai’s Supreme Fiscal Committee hired Deloitte LLP to lead the restructuring of Dubai World debt, the Department of Finance said. Deloitte’s Aidan Birkett, managing partner for corporate finance, was assigned.
Dubai, the second biggest of seven sheikhdoms that make up the United Arab Emirates, set up a $20 billion Dubai Financial Support Fund after the credit crisis triggered the world’s worst property crash and hurt its finance and tourism industries. The emirate raised $10 billion by selling bonds to the U.A.E. central bank in February, with some of the money going to property developers.
Dubai ruler Sheikh Mohammed Bin Rashid Al-Maktoum said Nov. 9 the emirate’s bond program to raise a further $10 billion will be “well received,” and those who doubt the unity of Dubai and Abu Dhabi should “shut up.” Abu Dhabi, the U.A.E.’s capital, is owner of the world’s biggest sovereign wealth fund and holds almost all of its oil.
Eleven days later, he removed the governor of the Dubai International Financial Centre, Omar Bin Sulaiman, who had led efforts to transform Dubai into a Middle East finance hub. The change came 24 hours after Sheikh Mohammed dropped the chairmen of Dubai Holding LLC and Dubai World, two large state-owned business groups, as well as the head of U.A.E.’s biggest developer Emaar Properties PJSC from the board of the Investment Corp. of Dubai, the emirate’s main holding company.
Home prices in Dubai plummeted 47 percent in the second quarter from a year ago, the steepest drop of any market, according to Knight Frank LLC. Property prices may drop further, a survey by Colliers International showed Oct. 14.
Dubai World had $59.3 billion in liabilities at the end of last year, its subsidiary Nakheel Development Ltd., said in a statement posted on the Nasdaq Dubai Web site Aug. 20. The company had total assets of $99.6 billion at the end of 2008 and total revenue of $14.2 billion.
Mark Faber has sharp eye and his predictions are always spot-on. He is an Austrian economist and maintains that the politicians must leave markets alone. You can hardly find Austrian economists, as 99% of economists think that economies can be manipulated and treated like their own fiefdom as they know best. Or their group, like the Keynesians, know best. If there is one thing clear about this economic crisis, it is the moral bankruptcy of the Keynesians as Keynesians are ALL interventionists, they have been brought up like this and market intervention worked for 50 year. But we know (and they know, but are afraid to say so as they will lose control if they do so), is that only the market knows best.
So, leave the market alone and let it clean the economy. Problem is, there hardly markets anymore, just interventions. Banking, car industry, almost everything is TBTF (too big to fail), with as a consequence a distorted economy which eventually has to come clean in any case, but the agony will be much bigger. So here we have the result. An economic crisis, created because of market distortions by politicians and supported by Keynesians.
War is coming and you must prepare yourself. Buy gold and silver. Soon, the newspapers will be full with stories that "nobody saw it coming". I am telling you now. Protect yourself.
In his gloomiest prediction yet, Marc Faber sees big financial bust leading to war
INTERNATIONAL. Marc Faber, the Swiss fund manager and Gloom Boom & Doom editor, said eventually there will be a big bust and then the whole credit expansion will come to an end. Before that happens, governments will continue printing money which in time will lead to a very high inflation rate, and the economy will not respond to continued stimulus.
Speaking at a conference in Singapore on Wednesday, Faber said: "The crisis has not solved anything. On the contrary there is less transparency today than there was before. The government's balance sheet is expanding, and the abuses that have led to the one cause of the crisis have continued".
"I think eventually there will be a big bust and then the whole credit expansion will come to an end," Faber added.
"Before that happens, governments will continue printing money which in time will lead to a very high inflation rate, and the economy will not respond to stimulus".
In one of his Gloomiest predictions, Faber, referred to as Dr Doom, said "the average family will be hurt by that, and then in order to distract the attention of the people, the governments will go to war".
"People ask me against whom? Well, they will invent an enemy," Faber said.
"At some stage, somewhere in future, we will have a war - that you have to be prepared for. And during war times, commodities go up strongly,” said Faber.
"If you want to hedge against war, you don't want to own derivatives in UBS and AIG, but you have to own them physically, like farmland and agricultural commodities. That is something to consider for you as a personal safety and hedge. You have to own some commodities," he added.
In a Bloomberg Television interview in Singapore Wednesday, Faber said "What will continue to happen is that the S&P 500 and the Dow Jones will go down relative to gold.
"I think gold will go up more," he added.
“Will it go US$2,000, US$200,000 or US$2 trillion? I don’t know,” Faber said. “But if you have money printing in the world, then the price will over time rise. It will go up more for things that you just can’t increase the supply, and the supply of precious metals is very limited.”
Faber expects the US government to increase its stimulus spending should the Standard & Poor’s 500 Index fall toward 900. The US budget deficit under President Barack Obama’s administration reached a record US$1.4 trillion in the fiscal year that ended Sept. 30. Debt amounted to 9.9% of the nation’s economy, triple the size of the 2008 shortfall.
“I don’t think the S&P will drop below 800 or 900, and eventually will go higher in nominal terms, but not necessary in real terms,” he said, predicting a correction in the measure in the “near term.”
Faber has been warning about a collapse of the capitalistic system 'as we know it today,' massive government debt defaults and the impoverishment of large segments of Western society.
In a May interview with CNBC, he said central banks will continue to print money at full speed, but long-term this strategy will lead to a fall in purchasing power and living standards, especially in developed countries.
The years 2006 and 2007 were "the peak of prosperity" and the world economy is not likely to return soon to that level, he added.
Unless the system is cleaned out of losses, "the way communism collapsed, capitalism will collapse," according to Faber. "The best way to deal with any economic problem is to let the market work it through."
"I repeat what I have said in the past," Faber said. “No decent citizen should trust the Federal Reserve for one second. It’s very important that everyone own some gold because the government will make the dollar (in the long term) useless."