Posts tagged Banking
October 1, 2011
Gary North | LewRockwell.com
You probably missed any media coverage of the September 26 speech by Federal Reserve Board of Governors member Sarah Raskin. The media ignored it. You would be wise not to ignore it.
There were a few brief news reports about it. There was no detailed analysis. The media usually ignore speeches by any FED Board member other than Bernanke.
Raskin’s speech reveals what is slowly dawning on the public. The economy is getting worse, and the FED is powerless to stop it.
Her speech was an attempt to reassure her listeners that the FED really does know what it’s doing, contrary to the evidence. The Federal Reserve has spent 45 months trying to deal with the sagging U.S. economy. Nothing is working. It looks as though nothing will work. But she wants us to believe that it’s not the FED’s fault. She did not say whose fault it is.
I have offered a line-by-line analysis of her speech. If you have money in a retirement fund, you would be wise to read it. I have posted it here.
I do not expect many people to read it. People are too busy. Bernanke knows this. The other Board members know this. They give their speeches, which get little coverage. They receive little criticism. They receive little applause. They have little power.
The Federal Open Market Committee has the power. Every eight weeks, the FOMC makes decisions in closed-door sessions that affect a billion people.
Then why read speeches by members of the Board of Governors? Officially, they are the government’s only source of indirect control over the FOMC, which is made up of presidents of the regional Federal Reserve banks, who in turn are appointed by regional FED banks, which are privately owned.
Members of the Board are appointed by the President. Their organization’s Web address ends in .gov. Legally, the Board is in charge of the entire system. This is a convenient myth for public consumption. Operationally, the Board acts as the mouthpiece of the New York Federal Reserve Bank. The New York FED is the most important private economic organization in the world.
Board members are apologists for the New York FED. When I say “apologists,” I mean this in the theological sense: “apologetics” – the defense of the faith. I do not mean it in the sense of offering an apology. The FED never says it is sorry for anything it has done. That would be perceived by Congress and the public a sign of weakness.
THE SYSTEM OF REPRESENTATION
The main spokesman for the FED is the Chairman of the Board of Governors: Bernanke. He is legally the agent of Congress. He is operationally the barrier between Congress and the New York Federal Reserve Bank.
This is how all government agencies work, and the Board of Governors is a government agency. The head of every cabinet-level department is appointed by the President and confirmed by the Senate. He serves at the convenience of the President. He imposes the President’s wishes on the bureaucracy.
In a pig’s eye.
The Secretary of Education is close to impotent to change any major policy. There is only one way to change policy: stop all funding to every branch of the bureaucracy that implements the old policy. Fire them all. Sadly, this is illegal. They are protected by Civil Service law.
Well, then, just stop the funding the old policy. Shut down the departments. Move all employees to other departments.
Legally, this can be done. It is never done. There would have to be hearings before both houses of Congress. Endless hearings. The American Federation of Teachers would scream bloody murder, meaning the nearly permanent senior officers in the AFT would scream bloody murder. The hearings would go on for years. Then the President leaves office. His reform program ends.
The bureaucracy cannot be fired. The newly appointed Secretary of Whatever goes out on the hustings to give speeches to special-interest groups related to the Department of Whatever. He has little authority over the day-to-day operations of the department. His task is to defend the budget and the reputation of “his” department.
Officially, the departmental Secretary is the agent of the Administration. Operationally, he becomes the agent of the department he oversees for a few years. He will leave. The employees will remain. If you want to grasp this system in two minutes, watch this segment from Yes, Minister.
Members of the FED’s Board of Governors are appointed for 14-year terms. We read:
The full term of a Governor is 14 years; appointments are staggered so that one term expires on January 31 of each even-numbered year. A Governor who has served a full term may not be reappointed, but a Governor who was appointed to complete the balance of an unexpired term may be reappointed to a full 14-year term.
Once appointed, Governors may not be removed from office for their policy views. The lengthy terms and staggered appointments are intended to contribute to the insulation of the Board – and the Federal Reserve System as a whole – from day-to-day political pressures to which it might otherwise be subject.
There is no industry-related agency of the U.S. government that is more insulated from politics. Therefore, there is no agency that is more completely under the domination of the industry that it is supposed to control. (The CIA and the NSA are not representatives of industries. They are separate fiefdoms.)
If the United States Army were this insulated from politics, the USA would live in a militarized society. The Army would run the show. Its only major rivals would be the Air Force, the CIA, the NSA, the FBI, and the Federal Reserve. To imagine that Congress would have any say in such a society would be naive. The defense industry would be the premier industry in the society.
Our society is a bankers’ society, meaning a handful of large banks. The supreme mark of this is the openly announced independence of the Federal Reserve from politics. No other agency of government has publicly claimed this degree of independence from politics, which means independence from the voters.
In every textbook on history or politics that mentions the FED, the author assures the readers that this utterly undemocratic arrangement is for the good of the people. The fact that the arrangement is a flagrant violation of the religion of democracy, which governs all tax-funded educational institutions, is never mentioned in polite circles.
So, our elected officials are not the operational agents of the voters in matters of banking. They are the operational agents of the big bank cartel.
Until the crash of 2008, most voters were unaware of this system of representation. But that crash changed the old climate of opinion. The reason was Ron Paul. His candidacy for the Republican nomination for President in the second half of 2007 got the message out. Then the crash and the bailouts confirmed his message.
This had not happened in the history of the Federal Reserve. The FED’s Board is now playing defensive politics. Yet, legally, it is not a political institution.
This is why people should pay more attention to speeches by members of the Board of Governors.
I will only go over the highlights here. I have covered the speech in detail elsewhere.
Like all members of the Board, she is burdened by the inescapable reality of the sagging economy. Unemployment is over 9% two and a half years after the beginning of the recovery. This has never happened before.
Housing prices are still falling. The bubble that popped in 2006 is still in decline. There is no sign that we are close to the bottom.
Consumer spending is stalled. This is a mark of government and central bank policy failure for a Keynesian economist. The only worse mark is falling spending.
She praised the FED for falling interest rates. She claimed that the FED’s monetary policies have achieved this positive result. What she, Bernanke, and other Board members never mention is this: falling interest rates are the universal mark of a recession in progress. Investors buy bonds in order to lock in an interest rate. They see this as safe-haven investing.
Falling rates since 2007 have been the result of investors who have moved their capital to government bonds. But FED officials claim that FED policies achieved this. So, Mrs. Raskin said this.
Rather than reviewing the vast academic literature regarding the effect of conventional monetary policy, I will simply pose the counterfactual question: What would have happened to U.S. employment if monetary policy had failed to respond forcefully to the financial crisis and economic downturn? Economic models – the Fed’s and others – suggest that if the federal funds rate target had been held at a fixed level of 5 percent from the fourth quarter of 2007 until now, rather than being reduced to its actual target range of 0 to 1/4 percent, then the unemployment rate would be several percentage points higher than it is today. In other words, by following our actual policy of keeping the target funds rate at its effective lower bound since late 2008, the Federal Reserve saved millions of jobs that would otherwise have been lost. Of course, substantial uncertainty surrounds various specific estimates, but there should be no doubt that the FOMC’s forceful actions helped mitigate the consequences of the crisis and thereby spared American families and businesses from even greater pain.
The FedFunds rate is the rate that applies to banks’ overnight lending to each other. Demand for this type of short-term funding collapsed in 2008. Banks have increased their holdings of excess reserves to $1.7 trillion. This is why we are not seeing hyperinflation. Bankers are afraid of another recession. They want money in the bank.
The FED can take credit for having given credit to big banks in the big bank bailout of October 2008, which was opposed by voters. The FED could argue along these lines.
It is true that interest rates fall in a recession. The last time in American history that we have seen rates this low was in 1933. But, because the Federal Reserve bought nearly worthless Fannie and Freddie bonds at face value from the government after Hank Paulson unilaterally nationalized the mortgage market in September of 2008, and because the FED swapped at face value its portfolio of highly liquid T-bills for illiquid toxic corporate bonds held by large banks, we are not in a depression. Which do you want: low interest rates with 9% unemployment or 12% unemployment. Those were our only choices in 2008 and 2009. Trust us.
But this is not the Party Line at the FED. The Party Line is that the FED’s increase of about $2 trillion in its portfolio was the source of bank stability, corporate survival, and an acceptable though unfortunate unemployment rate of 9.1%. The FED pushed down interest rates – rates that would have stayed high, contrary to all historical records of recessions. That saved the American economy and the world economy.
Raskin heaped great praise on the FED.
Given the magnitude of the global financial crisis and its aftermath, the Federal Reserve clearly needed to provide additional monetary accommodation beyond simply keeping short-term interest rates close to zero. Consequently, like a number of other major central banks around the world, the FOMC has been deploying unconventional policy tools to promote the economic recovery.
This is exactly what we would expect from one of five members of a government Board that governs monetary policy, and which is supposed to be held responsible for failure. But, as the video from “Yes, Minister” indicates, no one is ever supposed to be held responsible in a government agency. She thinks they deserve a round of applause.
My FOMC colleagues and I have recently been faced with complex decisions about the use of unconventional policy tools under extraordinary economic and financial conditions. And while we may not all agree with every decision, I believe that the public can have a very high degree of confidence in the fundamental integrity and soundness of our decisionmaking process.
My response is to give them a standing zen ovation: the sound of millions of one-handed people clapping.
Mrs. Raskin offered no evidence for hope of reduced unemployment, revived business investing, or increased consumer spending. She was remarkably silent on these issues. She reaffirmed the decision of the FOMC. It will be mid-2013 before the FED dares reverse its present policy of twisting.
In August, we decided to be more specific about the timing, and our two most recent meeting statements have indicated that “economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
So, we are still in the swamp of low growth. We will remain in it for a long time, politically speaking. She has issued President Obama a challenge: run your campaign in a stagnating economy.
She offered no analysis of the labor market. Yet her speech was entitled “Monetary Policy and Job Creation.”
This was a defensive speech. It indicates that the FED has no plan to get the economy back on track.
Falling long-term interest rates are the preliminary sign of a looming recession.
What will the FED do when recession hits next year, as seems likely? What rabbits will they pull out of the monetary hat?
The FED is on the defensive. Investors should take heed.
There is a widely held belief in the mainstream that “the debate has been settled” regarding Global Warming. If, however, you look at the financiers, beneficiaries and the tactics used to push forth with the Global Warming research and the associated policy, it gives one reason to be suspicious of what is really going on here.
More attention needs to be paid to non-conventional views on Global Warming. While the government has shelled out nearly $80 billion U.S. dollars to scientists, in order to generate research indicating man-made global warming is real; only $23 million U.S. dollars have been given to scientists with a skeptical angle.
Give a large swath of scientists a momentous sum of money and they will publish papers showing just about anything is true, whether or not that is actually the case. When you have a massively dis-proportionate sum going to one side of the argument; you will likely have the illusion of consensus and most people will believe that your research proves something concrete.
I’d like to present a few alternative views for your consideration. Now I’m sure these aren’t the be all end all proof of anything in particular; but at least they show an alternative viewpoint and provide a window into the kinds of individuals and organizations involved, as well as the motives, behind the push for Climate Change taxation and regulation.
The Skeptics Handbook II: Global Bullies Want Your Money
It’s unthinkable. Big Government has spent $79 billion on the climate industry,
3000 times more than Big-oil. Leading climate scientists won’t debate in public
and won’t provide their data. What do they hide? When faced with legal requests
they say they’ve “lost” the original global temperature records. Thousands of
scientists are rising in protest against the scare campaign. Meanwhile $126 billion
turned over in carbon markets in 2008 and bankers get set to make billions.
Great Global Warming Swindle
Everything youve ever been told about Global Warming is probably untrue. From Al Gore’s An Inconvenient Truth to news reports from the popular media outlets and even public classrooms which, in chicken little fashion, seem to be screaming – the sky is falling. But is it really? This film blows the whistle on what may be the biggest swindle in modern history. We are told that Man Made Global Warming is the biggest threat ever to mankind and that it may even threaten our very survival; and, if we do not change our ways and reduce CO2 emissions – polar ice caps will melt, coastal areas will flood and hurricanes like Katrina will become common. With nearly Gestapo like tactics we are told not to question! There is absolutely no room for doubt because there is a “scientific consensus.” Anyone who questions the data or conclusion is an enemy of the state and humanity. Well, bring it on because this is exactly what this well documented film does. The Great Global Warming Swindle uses a plethora of leading scientists who will not bend to political or philosophical or ideaological pressure. So watch this film and make up your own mind.
CBC Documentary: Global Warming Doomsday Called Off
In this eye-opening documentary viewers will discover how the most respected researchers from all over the world explode the doom and gloom of global warming.
Humans stand accused of having set off a global climate catastrophe by increasing the amount of carbon dioxide in the atmosphere. The prophecy of doom is clear and media pass on the message uncritically.
Now serious criticism has arisen from a number of heavyweight independent scientists. They argue that most of the climatic change we have seen is due to natural variations.
Its interesting how the media will focus on the most trivial matters, such as a politician’s personal problems, or spin about how the economic improvement is “just around the corner.” In this situation, a couple of guys get caught smuggling $134.5 worth of bonds and you hear little to nothing in the press.
Most of you reading this have, at least a suspicion that something smells rotten in Denmark, when it comes to the integrity of the press during this day and age. Stories like this are confirmation of any suspicions you may have. This is a historic event, which we need to get to the bottom of and understand; because there is probably something important here that we need to know about.
Since the media is sweeping it under the rug, I suspect that the perpetrators may have been acting on the behalf of well connected individuals. Perhaps the media refuses to report real news altogether; opting instead to create a fantasy world, which acts as a sort of red herring. This keeps people from getting in the way of powerful individuals; since they wish to conduct their business undisturbed.
Personally, I think there is a little news that leaks in there, from time to time; but, for the most part, the world portrayed on television is a fantasy one used to control the behavior of those who watch. Accuracy and professionalism don’t really factor into the equation much anymore.
US government securities seized from Japanese nationals, not clear whether real or fake
Bonds worth US$ 134.5 billion are seized. This is the largest financial smuggling case in history. But are they real? Concern over ‘funny money’ or counterfeit securities is spreading in Asia. The international press is silent.
Milan (AsiaNews) – Italy’s financial police (Guardia italiana di Finanza) has seized US bonds worth US 134.5 billion from two Japanese nationals at Chiasso (40 km from Milan) on the border between Italy and Switzerland. They include 249 US Federal Reserve bonds worth US$ 500 million each, plus ten Kennedy bonds and other US government securities worth a billion dollar each.
Italian authorities have not yet determined whether they are real or fake, but if they are real the attempt to take them into Switzerland would be the largest financial smuggling operation in history; if they are fake, the matter would be even more mind-boggling because the quality of the counterfeit work is such that the fake bonds are undistinguishable from the real ones.
What caught the policemen’s attention were the billion dollar securities. Such a large denomination is not available in regular financial and banking markets. Only states handle such amounts of money.
The question now is who could or would counterfeit or smuggle these non-negotiable bonds.
In order to stop money laundering Italian law sets a ceiling of 10,000 euros per person for importing or exporting money without declaring it. The penalty for violating the law is 40 per cent of the money seized.
If the certificates were real, for Italy it would be like hitting the jackpot. The fine alone would amount to US$ 38 billion, five times the estimated cost of rebuilding quake-devastated Abruzzi region. It would help Italy’s eliminate its public deficit.
If the certificates are fakes the two Japanese nationals could get a very lengthy jail sentence for fraud.
As soon as the seizure was made the US Embassy in Rome was informed. Italian and US secret services were called in to assist the Italian financial police.
Some important international financial newspapers had already reported on the existence of ‘funny money’ circulating on parallel, i.e. unofficial, financial markets.
For AsiaNews a few points need considering:
1. When it comes to Italy the world press has tended to focus on Italian Prime Minister Berlusconi’s personal problems rather than on stories like the bonds smuggling affair which has been front page on Italian newspapers.
2. The fear of counterfeit bonds and securities has spread across Asia with the result that real securities are also considered with suspicion.
3. During the Second World War several countries at war printed and put in circulation perfectly counterfeit enemy money. It is also historically established that some central banks, like the Bank of Italy 65 years ago, issued the same securities twice (identical registered number and code). This way they could print more money with legal tender than they officially declared. The main difference though is that 65 years ago the world was involved in a bloody war, which is not the case today.
This time the banks are zeroing in on Geithner’s cash giveaway bonanza, the “Public Private Investment Partnership” (PPIP). As expected, Bank of America and Citigroup have angled their way to the front of the herd, thrusting their snouts into the public trough and extracting whatever morsels they can find amid a din of gurgling and sucking sounds. Here’s the story from the New York Post:
“As Treasury Secretary Tim Geithner orchestrated a plan to help the nation’s largest banks purge themselves of toxic mortgage assets, Citigroup and Bank of America have been aggressively scooping up those same securities in the secondary market, sources told The Post…
But the banks’ purchase of so-called AAA-rated mortgage-backed securities, including some that use alt-A and option ARM as collateral, is raising eyebrows among even the most seasoned traders. Alt-A and option ARM loans have widely been seen as the next mortgage type to see increases in defaults.
One Wall Street trader told The Post that what’s been most puzzling about the purchases is how aggressive both banks have been in their buying, sometimes paying higher prices than competing bidders are willing to pay.
Recently, securities rated AAA have changed hands for roughly 30 cents on the dollar, and most of the buyers have been hedge funds acting opportunistically on a bet that prices will rise over time. However, sources said Citi and BofA have trumped those bids.”(“Double Dippers; Citi and B of A buy laundered loans at lower rates”, Mark DeCambre, New York Post)
Thus begins the next taxpayer-subsidized feeding frenzy, featuring all the usual suspects. The race is on to vacuum up as much toxic mortgage paper as possible so it can be dumped on Uncle Sam at a hefty profit. These are the same miscreants the Obama administration is so dead-set on rescuing. Better to let them sink from their own bad bets.
How is it that industry rep Geithner couldn’t see that his latest round of corporate welfare would create incentives for the bank scoundrels to game the system again? Naturally, if the government goes into the business of buying crap-loans from teetering financial institutions, the speculators and snake oil salesmen will follow. And so they have. Citi and B of A are just the first to respond to Geithner’s pigwhistle. Next will be the hedgies and the Private Equity porkers, all nuzzling up to the Treasury’s feedbin.
Geithner’s plan is a disaster from the get-go. It jacks up the price of garbage assets, rewards the misallocation of capital, invites rampant fraud, and prolongs the recession. Worst of all, it transforms the FDIC into a hedge fund putting individual bank deposits at greater risk. Economist Jeffrey Sachs sums up Geithner’s “public-private” boondoggle in his article “Will Geithner and Summers suceed in raiding the FDIC and Fed?”:
“Geithner and Summers have now announced their plan to raid the Federal Deposit Insurance Corporation (FDIC) and Federal Reserve to subsidize investors to buy toxic assets from the banks at inflated prices. If carried out, the result will be a massive transfer of wealth — of perhaps hundreds of billions of dollars — to bank shareholders from the taxpayers (who will absorb losses at the FDIC and Fed)…
The FDIC is lending money at a low interest rate and on a non-recourse basis even though the FDIC is likely to experience a massive default on its loans to the investment funds….In essence, the FDIC is transferring hundreds of billions of dollars of taxpayer wealth to the banks…The public will not accept overpaying for the toxic assets at taxpayers’ expense. Thus, it is very likely that the Administration will attempt to avoid Congressional oversight of the plan, and to count on confusion and the evident “good news” of soaring stock market prices to justify their actions. ….
Other parts of the plan support subsidized loans from the Treasury and, even more, from the Fed. The Fed is already buying up hundreds of billions of dollars of toxic assets with little if any oversight or offsetting appropriations. Since the Federal Reserve profits and losses eventually show up on the budget, the Fed’s purchases of toxic assets also should fall under the Federal Credit Reform Act and should be explicitly budgeted. (“Will Geithner and Summers suceed in raiding the FDIC and Fed?”, Jeffrey Sachs, Huffington Post)
As Sachs points out, the Fed’s liabilities will eventually be shifted onto the taxpayer. But that hasn’t stopped Bernanke from writing checks on an account that is overdrawn by $11 trillion. Nor has it compelled Geithner to seek congressional authorization before he leverages the FDIC up to its eyeballs. These decisions are all being made by a small coterie of bank loyalists who operate independent of any oversight or government supervision. They do what’s best for their constituents and let the chips fall where they may.
Earlier this week, Geithner asked Congress for additional powers to take over insolvent non-bank financial institutions. The Washington Post:
“The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.”
Geithner must think he’s a shoe-in for the new “systemic regulator” post because of the exemplary way he handled the AIG bonus scandal.
Of course, in the bizarro world of Washington–where failure typically catapults one to higher office–it’s only logical that Geithner would be elevated to Uber-Regulator, not only controlling the public purse, but using his own peerless grasp of the marketplace to decide which institutions pose a systemic risk and need to be sidelined, and which need stepped-up government support via limitless capital injections.
Prediction: If Geithner is granted these special powers by the braindead Congress, the country will undergo the greatest period of bank consolidation in its 230 year history. This is a blatant power grab by a shifty character who has risen to his present pay-grade by nosing his way up the political stepladder. Congress had better get its act together and put an end to this nonsense or the nation will continue its fast-paced metamorphosis into a feudal oligarchy run by the Bank Mafia and Wall Street racketeers. The first step, is to give Geithner, Summers and any other of the Rubin-clones a full-body bacon-rub followed by a few brisk dunks in the shark tank. Then, hose down Treasury and bring in a whole new team.
Nobel Prize winning economist Joseph Stiglitz summed up Geithner’s “public-private” fiasco like this:
“Quite frankly, this amounts to robbery of the American people. I don’t think it’s going to work because I think there’ll be a lot of anger about putting the losses so much on the shoulder of the American taxpayer.”
It looks like the Attorney General of New York will at least attempt to shut down the Wall-Street/Federal Reserve brothel, in which billions of U.S. tax dollars were stolen by high-level U.S. government and Federal Reserve crooks.
The loot was placed into the hands of large institutions such as Goldman Sachs, formerly headed by the Treasury Secretary Henry Paulson.
This was, of course, one of those action/reaction/synthesis aka problem/reaction/solution enterprises, where those in positions of authority create the problem, then wait for the public to react and demand a solution; then they provide the perceived “solution,” which only goes to further the agenda they had set out with initially.
Cuomo Widens His A.I.G. Investigation
Attorney General Andrew M. Cuomo of New York said Thursday afternoon that he was widening his investigation of the American International Group to examine whether its trading counterparties improperly received billions of dollars in government money from the troubled insurer.
Those counterparties include Goldman Sachs, which received $12.9 billion, as well as Société Générale of France and Deutsche Bank of Germany, which each received nearly $12 billion.
“Our investigation into corporate bonuses has led us to an investigation of the credit default swap contracts at A.I.G.,” Mr. Cuomo said in a statement. “CDS contracts were at the heart of A.I.G.’s meltdown. The question is whether the contracts are being wound down properly and efficiently or whether they have become a vehicle for funneling billions in taxpayers dollars to capitalize banks all over the world.”
Other counterparties that received money from A.I.G. include Barclays of Britain ($8.5 billion), Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), UBS of Switzerland ($5 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion).
The government injected about $180 billion in bailout money into A.I.G. to prevent its collapse after the company found itself on the wrong side of the credit default swaps that it sold. The swaps are insurance-like instruments that allow investors to hedge against bond defaults.
A.I.G.’s financial products division sold the credit default swaps, and it has faced a wall of public outrage after it paid out $165 million in retention bonuses. Earlier this week, Mr. Cuomo said A.I.G. employees had agreed to return $50 million of those bonuses.
Two of the most corrupt professions on the planet are at work here: banking and accounting. Its funny that they should even call it “accounting” anymore; as it is meant to provide for “accountability” and the “rule of law.” Instead we are stuck with “deceivability” and the “rule of men.”
As you will soon learn, if you haven’t already; there is no reason whatsoever to hold the securities of most of the corporations today. They simply don’t have to account for the value of their assets anymore. If there is no real accountability, then there will be no confidence. If there is no confidence, then there will be no speedy recovery.
This depression will languish for years. People are getting FED-UP with these kinds of cheap, inbred bankster shenanigans; they are starting to buy real hard assets to squirrel away what they are able, to whether the coming storm.
What? You thought the recovery is around the corner. Do you honestly believe what these people who have been repeatedly wrong are telling you once again, like a broken record? The recovery, as you may picture it, is not going to happen.
People are going to have to change their habits to adapt to the new paradigm. They are going to have to cut out the waste, become more sufficient unto themselves, manage their own money with sound economic principles. They must be guided by a understanding of just how perverted the whole economic system has become, over the past couple of decades.
Accounting Brothel Opens Doors for Banker Fiesta
March 19 (Bloomberg) — The banks demanded that the accountants give them leeway in how they report losses to investors. The accountants responded by giving away their souls.
This week, the Financial Accounting Standards Board unveiled what may be the dumbest, most bankrupt proposal in its 36-year history. If it stands, the FASB ought to change its name to the Fraudulent Accounting Standards Board. It’s that bad.
Here’s what the board is floating. Starting this quarter, U.S. companies would be allowed to report net-income figures that ignore severe, long-term price declines in securities they own. Not just debt securities, mind you, but even common stocks and other equities, too.
All a company would need to do is say it doesn’t intend to sell them and that it probably won’t have to. In most cases, it wouldn’t matter how much the value was down, or for how long. In effect, a company would have to admit being on its deathbed before the rules would force it to take hits to earnings.
So, if these rules had been in place last year, a company that still owned shares of American International Group Inc. or Fannie Mae, for instance, could exclude those stocks’ price declines from net income entirely. It would make no difference that the companies were seized by the government last year, or that both are penny stocks. The loss would get buried away from the income statement, in a balance-sheet line called “accumulated other comprehensive income.” (more…)
If you like economic depression, Obama is your man. The stock market is shouting this message loudly and clearly. The S & P 500 (measured by the security SPY) made a little high at 100.41 on November 4, 2008. The election was the next day. It has been downhill ever since. The close on March 2, 2009 was 70.60. This 30 percent decline qualifies as what used to be an ordinary bear market!
Congress and the President could not construct better measures, proposed and enacted, to deepen this depression if they tried. Congressional Democrats intend to ensconce Democrats as the majority party for the next 25 years or so. Their chosen method is wasteful pork sold as rational investment. But by gilding the nests of their chosen constituencies and supporters with huge taxpayer-funded giveaways, they will deepen and lengthen the depression.
The stock market tells us this, but it is easy for stimulus supporters to explain away the stock market’s drop in other ways. Obama supporters are likely to extol the good things that his program is doing to revive spending in the economy, and to regard the stock market as an aberrant den of gamblers and thieves who deserve their Bush-induced fate.
Very few men on the street, including my doctor, understand that spending, whether private or government, does not get rid of economic depression; and the lack of spending does not cause it. They do not fathom that government spending, borrowing, and taxing will further gash the sinking economy below the water line and send it to its watery grave. They are more inclined to believe, along with prominent economists, that government spending should be increased by trillions more. There cannot be too much of a good thing.
People automatically think that if everyone does not spend, then how can businesses keep going and hire people? How can the economy work? Then they think, if people only have money, then they can spend. If the government spending will only put that money into their hands, this will cause people to spend. It will jump start the economy, restore business confidence, and all will be well.
This story has a firm hold on the public imagination, but things don’t work that way. People in the aggregate can only earn money to spend by working productively. Money still doesn’t grow on trees.
The government doesn’t have a money tree either. Without resorting to inflation, it can only shift money around. America’s federal government is a group of Americans who are empowered to tax the rest of us and borrow from anyone in the world. This money is collected from you, me, and others. We then have less to spend. Shifting money from the left pocket to the right pocket doesn’t enhance the total amount. (more…)
Things are now “Out of Control.”
This international financial crisis is now out of control as the world asks if the USA has two presidents, one president or no president at all.
It would appear that Paulson is in financial control with Bernanke as his second.
I warned you by personal email long before the statement was proven totally correct that “This is it.” That was followed by “This is it, and it is now.” Many people laughed it off.
This is it, and it is now.
Now it is out of control.
Now we enter the Collapse of Confidence period.
Then we begin the Weimar Experience.
It has all hit the fan, and still the absolute majority have no clue. The OTC derivative dealers broke the system into millions of pieces of glass. This broken glass cannot be put back together.
It is heart rending to see a picture of GM autoworkers holding a prayer meeting for their retirement funds. The retirement money was never funded. It is a lost hope. This is another responsibility the government has undertaken that is going to go wild.
Those of you still in freeze frame are headed for lines around your bank. Your bank will likely be acquired by another bank that also is in deep trouble.
The US dollar, like a leaderless company, will lose its respect and therefore value.
In order of importance the following MUST be done unless you want to be one of the suffering masses that will be all too visible this winter:
1. You must have your assets held anywhere they are in true custodial-ship accounts. That type of account at a bank or broker states clearly that the assets held there are not on the balance sheet of the host financial entity. Those assets are clearly segregated in your name. This must be reviewed by counsel to be sure you have what you think you have. Don’t cheap out. All you have is depending on the validity of true custodial-ship accounts.
You cannot know all the banks are broke, however I feel ALL banks are broke because finance is an intertwined system that if visible would look like a spider’s web. Problems on the top will materialize all along the web. Therefore the singular most important step you must take is the establishment of a true custodial-ship account.
Do not assume you have this type of account unless a competent attorney reviews the account papers.
2. I am extremely concerned about those of you who persist in holding certificates for gold rather than holding the actual metal either delivered to you or held for you in a true custodial-ship type account. The scams out there in gold are plentiful. The only way to avoid these scams absolutely is to have your gold in your own possession.
Every other means of holding gold is steps away from perfection. Some will be ok, but many will not.
3. Why would anyone fail to either take paper certificates or order their financial agent to make direct registration book entry at the transfer agent? In most cases you only have until year-end to accomplish this strategy.
4. Withdraw from ETFs.
5. If you carelessly keep large assets with your broker you are as mad as a hatter. The FDIC DOES NOT have the money to guarantee all they are undertaking. Withdraw excess money constantly from any net broker. If you are so stubborn that you think you can trade to insure yourself when your funds are not making money while still getting your money that counts you are nuts. Admit to yourself you are nothing more than a gambling addict in a downward spiral.
6. Leave no gold or coins with any coin dealer.
7. If you can withdraw from your corporate retirement plan do it.
8. Withdraw from credit unions.
9. Withdraw from all money market instruments.
10. This is it.
11. It is now.
12. It is out of control NOW.
The next two months are going to be shocking, but nothing compared to what you will have to experience in 2009.
Comrades, we are faced with a situation whereby the government, now more Socialist than ever, flat out refuses to listen to the will of the people; despite the fact that their constituents oppose their bankster “rescue” plan 9 to 1.
I watched, disgusted, as so-many representatives spoke on the floor of the house. Most of them only concerned with the pork and incentives for idiots (like increasing FDIC insurance), who won’t understand that they are really being screwed and that the FDIC insurance is going to be worthless at any level if the fiat money system collapses.
Imagine that, trying to buy a few votes, versus the future of our nation. The incredulity of these so-called “representatives” is beyond reproach and I am quite certain that their actions will be are sorely regretted legacy, just months from now when “bailout” Barney’s farce is realized for what it actually is.
Betrayed by the Bailout: The Death of Democracy
On this date, October 3, 2008, the American people were betrayed by those whom they had elected to represent them. The members of Congress who voted for the Wall Street “bailout” violated their oath of office to “support and defend the Constitution” … “that I will bear true faith and allegiance to the same” … “and that I will well and faithfully discharge the duties of the office on which I am about to enter: …”
Without holding any meaningful hearings or public discussions and listening only to those most responsible for the economic disaster, Federal Reserve Board Chairman Ben Bernanke and Treasury Secretary Henry Paulson, Congress abdicated its responsibility to the American people.
Locking out most members from all discussions, the congressional “leadership” emerged from their backrooms with legislation that grants Secretary Paulson the ability to spend at least $700 billion to “take such actions as [he] deems necessary” … ” to promote financial market stability.”
Entrusting tremendous political and financial power (and a ton of borrowed money that taxpayers will have to repay with interest) into Paulson’s sole discretion, members of Congress must have been aware that, prior to his cabinet appointment in 2006, Paulson worked for 32 years at Goldman Sachs, one of the Wall Street firms that stands to benefit greatly from his “actions.” (more…)
Have you acted to protect yourself? This type of event has only one way to go, from California to Maine.
WaMu, now there is a kettle afraid of the pot. Can you wait 8 weeks to eat?
More strange doings tonight surrounding the failure and federal takeover of IndyMac: some rival banks are refusing to honor cashier’s checks written by IndyMac — even though those checks are backed by the federal government.
John Bovenzi, the FDIC official now running IndyMac, tells the Los Angeles Times today he is “deeply troubled by reports that there are financial institutions that are refusing to honor or are placing excessive holds on IndyMac Federal checks.”
On latimes.com tonight: “Sheryl MacPhee, 46, said she liquidated a certificate of deposit at IndyMac’s San Marino branch Tuesday morning after a two-hour wait. She then took the cashier’s check to a Washington Mutual branch in South Pasadena to deposit.
“MacPhee said a WaMu manager told her that under a new corporate policy, the bank was not accepting IndyMac checks. If a customer insisted on depositing the check, it could be eight weeks or more before the full amount would be accessible, she said she was told.”
More: “WaMu spokeswoman Olivia Riley declined to discuss details of the bank’s check policies. ‘We have a check hold policy that takes into consideration a variety of factors,’ she said. ‘WaMu is accepting checks from IndyMac customers; however, depending on the specifics, funds will be subject to an extended hold period.’ Wells Fargo said it too was placing extended holds on many IndyMac checks as a precaution.
“Officials at the Office of Thrift Supervision, WaMu’s chief regulator, are investigating the complaints about the checks, OTS spokesman William Ruberry said.”