by Martin D. Weiss, Ph.D. 11-23-09
Martin D. Weiss, Ph.D.
In the scenario I’m about to paint for you, the dialog is fictional, but all the facts and figures are real.
The time: 1 AM, November 23, 2011, exactly two years from now.
The place: the White House, suddenly and unexpectedly under siege as a new financial crisis erupts.
The economic booms of 2010 have morphed into superbooms … the superbooms into bubbles … and the bubbles into busts.
Large banks are again on the brink. Financial markets are again in turmoil.
Wall Street giants like Goldman Sachs, JPMorgan Chase, and Morgan Stanley — the outstanding survivors of an off-again-on-again debt crisis — are now its primary victims.
Investments like long-term U.S. Treasury bonds — long sought as safe harbors — are now collapsing in price, turning into torpedoes that can sink even the sturdiest of portfolios.
But most important, the government’s too-big-to-fail bailouts, shotgun mergers, and mad money printing — previously hailed as cures that killed the contagion of 2008 — are now widely viewed as far worse than any disease.
President Obama and Treasury Secretary Geithner have huddled in the Oval Office for hours, struggling to find new solutions to old problems: Wall Street meltdowns, renewed threats of a great depression, millions more thrown out of work.
After a long and heated debate, the president slumps back into his armchair, signaling it’s time to talk more frankly — to reminisce about past policies and rethink what might have gone wrong.
“With 20-20 hindsight,” he remarks after an introspective pause, “it’s clear we were overly focused on the intended consequences of our efforts — the economic recovery, the bounceback in markets, the jobs saved. Meanwhile, we were blindsided by the unintended consequences, many of which have proven to be bigger, more durable and, ultimately, more impactful than the benefits we did achieve.”
The Treasury Secretary, weary from marathon meetings on precisely the same subject, nods in silent agreement.
“So, perhaps one of our tasks,” continues the president, “should be to document two basic issues: What precisely are the unintended consequences? And what exactly did we do to cause them?”
“We don’t have to,” says Geithner sheepishly.
“Why not?”
“Because it’s already been done. Those issues have already been thoroughly documented.”
“Since when?”
“Since the fall of 2009. That’s when SIGTARP — the Special Inspector General for the Troubled Asset Relief Program — revealed the mistakes we made with the giant AIG bailout. And that’s also around the time the public began to react to the enormous contradiction between massive unemployment on Main Street and the monster we helped to create on Wall Street.”
Monster Bonuses
“Monster?” queries Obama. “You mean the giant bonuses?”
“Exactly. We already knew Wall Street execs had been giving themselves megabonuses for most of the decade —
— $29 billion for Citigroup’s Weill in 2003 … $27 billion for Blankfein at Goldman Sachs in 2006 … another $106 billion for Jon Winkelried and Gary Cohn, also at Goldman Sachs, in 2006-2007 … and many more. We already knew how the money from these obscenely large bonuses alone could have been enough to save millions of jobs.”
“Yes.”
“But what we did not know is how soon after the bailouts Wall Street would be at it again — first, dishing out megabonuses to heavy hitters in their trading rooms … then to sluggers in their sales departments … and later, as soon as the public tired of protesting, to themselves.”
“Exactly how soon?”
Geithner answers with questions of his own. “When was Wall Street on the verge of a total meltdown? In September of 2008! When were the record bonuses paid out? In December of 2009! So that’s 14 months. It was just 14 months later that the employee bonuses at the three big Wall Street survivors — Goldman Sachs, JPMorgan Chase, and Morgan Stanley — exceeded all prior records.”
“Even the record bonuses they paid out before the crisis?” the president asks with a mix of disbelief and disdain.
“Yes, even bigger than their record bonuses paid out before the crisis.”
“But why do we blame ourselves for all this?” the president wonders out loud.
The Bungled AIG Bailout
BRIC ETFs vs. The Dow
“In public, we don’t … and hopefully never will,” responds Geithner furtively. “But in private, we must admit that we screwed up — particularly with the AIG bailout.”
“Why?”
“For the simple reason that we — the Treasury and FRBNY, the Federal Reserve Bank of New York — didn’t just bail out AIG. Indirectly, we also bailed out all of AIG’s major counterparties, the biggest of which were Société Générale and Goldman Sachs.”
“Said who?”
“Said SIGTARP, the Special Inspector General for the Troubled Asset Relief Program, in its special report of November 2009. I have a copy of the report right here.”
“What precisely did SIGTARP find?” asks the president.
“In essence, they found that AIG’s counterparties — 16 major global banks — should have lost money in their trades with AIG, just like most investors lost money when other companies failed. But instead, AIG’s counterparties did not lose money. We made those creditors whole, practically to the penny.”
“How much did we pay ‘em?”
Before responding, the Treasury secretary flips to page 20 of the SIGTARP report and glances down at Table 2 — Total Payments to AIG Default Swap Counterparties (reproduced below).
BRIC ETFs vs. The Dow
Source: SIGTARP, November 17, 2009. “Factors Affecting Efforts to Limit
Payments to AIG Counterparties,” page 20 (pdf page 24).
“Société Générale,” he says, “got $9.6 billion in collateral payments from the money we had loaned earlier to AIG. Plus, we paid Société Générale another $6.9 billion through a special purpose vehicle we created, called Maiden Lane III. In total, the French bank walked off with $16.5 billion.
“Goldman Sachs,” continues Geithner, “got $8.4 billion in collateral payments, plus another $5.6 billion from Maiden Lane, adding up to $14 billion. “Deutsche Bank got a total of $8.5 billion … Merrill Lynch — $6.2 billion … UBS — $3.8 billion … plus …”
“Please cut to the chase,” says the president impatiently. “How much overall?”
“They got $62.1 billion, plus another $2.5 billion we agreed to pay to compensate them for shortfalls in their collateral. Grand total — $64.6 billion.”
“Wait a minute!” interjects the president. “A lot of these big banks, notably Goldman Sachs, have forever insisted that they never wanted a bailout, never needed one, and never got one.”
Geithner picks up the report and waves it for emphasis. “And SIGTARP has forever disagreed.”
“What’s their conclusion?”
“In effect, SIGTARP concluded that, via this back door, the 16 banks not only got big bailouts … they never had to pay back a dime of the money.”
The Sad Saga of How Taxpayers Were Sold Out
“What do you think really happened?” asks the president.
“I don’t think; I know. Remember, I was not only there, I was mostly in charge. So I can tell you flatly: We had our backs to the wall. Sure, we asked 12 of the biggest AIG counterparties to take haircuts, to accept some losses. But 11 out of the 12 refused. So we had no choice but to give them everything they wanted.”
“Why didn’t you press harder?”
“We had no negotiating leverage. Later, with GM and Chrysler, we forced creditors to make concessions by threatening to let the automakers fail. But with AIG, we had already declared, in effect, that we’d never let it fail.”
“When?”
“Several weeks earlier — when we loaned $86 billion to AIG, the biggest bailout in history. The end result was that, when it came time to negotiate with AIG’s creditors, we could no longer function as unbiased regulators. We were already in deep — as the company’s biggest stakeholder. The creditors knew they had us over a barrel. There was no way we could twist their arms.
“If that wasn’t bad enough,” Geithner continues, “I then compounded the problem by adhering too strictly to one of FRBNY’s core values — the concept of treating all counterparties equally. That doomed the negotiations because it gave each party effective veto power over any possible concession from any other party. The way I set things up, either all the banks had to agree to concessions … or none of the banks would agree to concessions. So, needless to say, none agreed to concessions. They got everything.”
Profound Impacts
My fictional scenario ends here. But the impacts of those fateful decisions of late 2008 and early 2009 do not.
The AIG rescue was the biggest taxpayer rip-off of all time. Worse, it was the master seed that sprouted a whole series of similar taxpayer rip-offs on Wall Street.
Just connect a few of the dots, and you’ll see what I mean:
1. The U.S. Treasury rushes to bail out AIG. That alone helps protect AIG’s counterparties from the direct losses they’d otherwise suffer in an AIG failure.
2. The Federal Reserve Bank of New York creates a special entity to pay off AIG’s creditors in full. While ordinary U.S. investors lose fortunes even in companies that are financially viable, 16 major banks don’t lose a penny even in a company that would otherwise be bankrupt — all thanks to the Fed’s largesse.
3. Prominent among these government-blessed banks is Goldman Sachs, Wall Street’s most extravagant giver of executive bonuses in 2006 and 2007 … and also Wall Street’s most lavish payer of employee bonuses in 2009.
The money flow is clear:
* From taxpayers to AIG …
* From AIG and the Fed to big Wall Street investment banks like Goldman Sachs, and then …
* From Goldman Sachs to its employees in the form of lavish bonuses.
It is, by far, the greatest taxpayer rip-off off all time!
Don’t get sucked up into this madness!
Check your email later this morning for specific instructions on how to avoid it, even profit from it!
Good luck and God bless!
Martin
Tuesday, November 24, 2009
Friday, October 30, 2009
Economy Grows But Jobless Number Still Soars
The nation's economic pulse is starting to beat more powerfully, but it's still too soon to crack open the champagne, President Obama noted Thursday after new numbers showed the economy grew in the third quarter.
The nation's economic pulse is starting to beat more powerfully, but it's still too soon to crack open the champagne, President Obama noted Thursday after new numbers showed the economy grew in the third quarter.
The gross domestic product grew at an annual rate of 3.5 percent, up from a 0.7 percent drop in the second quarter, and "the largest three-month gain we have seen in two years," Obama said at a small business event Thursday.
"This is obviously welcome news and an affirmation that this recession is abating and the steps we've taken have made a difference."
But persistently dismal jobless numbers still dampen any talk of a full recovery in the near future. The Labor Department reported Thursday that weekly numbers for newly laid-off workers fell by 1,000 to a seasonally-adjusted 530,000, less than than the 521,000 government economists had expected.
House Minority Leader John Boehner indicated that's the true measure of recovery.
"I'm pleased that the GDP numbers this morning were up. But the question is, where are the jobs?" he asked.
That's also a sentiment the administration has openly expressed and the president revisited Thursday. "The benchmark I use to measure the strength of our economy is not just whether our GDP is growing, but whether we are creating jobs, whether families are having an easier time paying their bills, whether our businesses are hiring and doing well."
The economy's personal impact on Americans has been the central concern of administration critics, who say people don't feel the economic downturn in abstract GDP terms. They feel it, they say, in their paychecks, or lack thereof.
The administration has tried to show it recognizes this. In remarks to a House hearing Thursday, Treasury Secretary Tim Geithner said the situation on American families is "alive and acute."
Still, compounding Republican concerns is the health care reform bill touted by House Speaker Nancy Pelosi Thursday.
"This bill right here, the Pelosi health care bill, will do nothing more than to kill millions more American jobs," said Boehner, R-Ohio.
Council of Economic Advisers Chair Christina Romer chose to look to the horizon.
"The turnaround in crucial labor market indicators, such as employment and the unemployment rate, typically occurs after the turnaround in GDP."
The nation's economic pulse is starting to beat more powerfully, but it's still too soon to crack open the champagne, President Obama noted Thursday after new numbers showed the economy grew in the third quarter.
The gross domestic product grew at an annual rate of 3.5 percent, up from a 0.7 percent drop in the second quarter, and "the largest three-month gain we have seen in two years," Obama said at a small business event Thursday.
"This is obviously welcome news and an affirmation that this recession is abating and the steps we've taken have made a difference."
But persistently dismal jobless numbers still dampen any talk of a full recovery in the near future. The Labor Department reported Thursday that weekly numbers for newly laid-off workers fell by 1,000 to a seasonally-adjusted 530,000, less than than the 521,000 government economists had expected.
House Minority Leader John Boehner indicated that's the true measure of recovery.
"I'm pleased that the GDP numbers this morning were up. But the question is, where are the jobs?" he asked.
That's also a sentiment the administration has openly expressed and the president revisited Thursday. "The benchmark I use to measure the strength of our economy is not just whether our GDP is growing, but whether we are creating jobs, whether families are having an easier time paying their bills, whether our businesses are hiring and doing well."
The economy's personal impact on Americans has been the central concern of administration critics, who say people don't feel the economic downturn in abstract GDP terms. They feel it, they say, in their paychecks, or lack thereof.
The administration has tried to show it recognizes this. In remarks to a House hearing Thursday, Treasury Secretary Tim Geithner said the situation on American families is "alive and acute."
Still, compounding Republican concerns is the health care reform bill touted by House Speaker Nancy Pelosi Thursday.
"This bill right here, the Pelosi health care bill, will do nothing more than to kill millions more American jobs," said Boehner, R-Ohio.
Council of Economic Advisers Chair Christina Romer chose to look to the horizon.
"The turnaround in crucial labor market indicators, such as employment and the unemployment rate, typically occurs after the turnaround in GDP."
Anything Less Than Full Disclosure is Unacceptable
Ron Paul
Texas Straight Talk
October 30, 2009
Last week a new bill was introduced in the Senate to audit the Federal Reserve. Some backers of my bill HR1207 and the existing Senate companion bill S.604 were a little miffed at this, but depending on how you think about it, this new legislation poses no great threat to our efforts.
election politics Anything Less Than Full Disclosure is Unacceptable
vaccine
There is still very powerful resistance to the disclosures that HR 1207 would require and efforts to weaken it will continue to pop up before this issue is settled.
With the economy in shambles, people are looking for answers – not just because of lost savings on Wall Street, but because of lost houses on Main Street. Because of the many problems we face, the Federal Reserve and its powers over the economy have come under scrutiny. This translates into a lot of political pressure on Congress. With all the House Republicans signed on as co-sponsors and over half of the Democrats, HR 1207 has enormous bipartisan support. It would be disingenuous for Washington not to embrace the principles behind this bill after all the promises for transparency. How can one credibly argue for more transparency in government in one breath and defend the secrecy of the Federal Reserve in the next?
However, there is still very powerful resistance to the disclosures that HR 1207 would require and efforts to weaken it will continue to pop up before this issue is settled.
The good news is that Washington is responding and the Federal Reserve has become the issue. Concerned Americans need to keep the pressure on by continuing to define what we want, and what we do not want.
One major concern is that HR 1207 constitutes some kind of power grab for Congress. Congress would not do a better job dictating interest rates or managing money supply growth than the Federal Reserve does for exactly the same reasons: Congress is not the free market. Any select group of people, no matter how wise and educated, simply cannot replace the wisdom of the market. HR 1207 does not seek to replace the wisdom of the Fed with the wisdom of Congress. That would be a giant step backwards. HR 1207 simply asks for full disclosure, and I am agreeable to allowing for a reasonable lag time to calm the fears that Congress intends to dictate monetary policy.
What we do want, what we insist upon, is that no longer will decisions that carry so much economic weight be made in absolute secrecy. We want to know what arrangements the Fed makes with other governments and central banks. We want to know who is benefitting from the actions of the Fed and what deals are being made. The Fed is already reacting to pressure by scaling back its liquidity facilities and returning to more traditional monetary policy through direct asset purchases. With nearly $800 billion in mortgage-backed securities on its books already, $800 billion in Treasury securities, and no real limit to what the Fed can acquire, there is a tremendous opportunity for malfeasance. We need to know who the Fed deals with, what they buy, how much they spend, and who benefits. As good as any step towards Federal Reserve transparency is, anything less than full disclosure at this point is unacceptable.
Texas Straight Talk
October 30, 2009
Last week a new bill was introduced in the Senate to audit the Federal Reserve. Some backers of my bill HR1207 and the existing Senate companion bill S.604 were a little miffed at this, but depending on how you think about it, this new legislation poses no great threat to our efforts.
election politics Anything Less Than Full Disclosure is Unacceptable
vaccine
There is still very powerful resistance to the disclosures that HR 1207 would require and efforts to weaken it will continue to pop up before this issue is settled.
With the economy in shambles, people are looking for answers – not just because of lost savings on Wall Street, but because of lost houses on Main Street. Because of the many problems we face, the Federal Reserve and its powers over the economy have come under scrutiny. This translates into a lot of political pressure on Congress. With all the House Republicans signed on as co-sponsors and over half of the Democrats, HR 1207 has enormous bipartisan support. It would be disingenuous for Washington not to embrace the principles behind this bill after all the promises for transparency. How can one credibly argue for more transparency in government in one breath and defend the secrecy of the Federal Reserve in the next?
However, there is still very powerful resistance to the disclosures that HR 1207 would require and efforts to weaken it will continue to pop up before this issue is settled.
The good news is that Washington is responding and the Federal Reserve has become the issue. Concerned Americans need to keep the pressure on by continuing to define what we want, and what we do not want.
One major concern is that HR 1207 constitutes some kind of power grab for Congress. Congress would not do a better job dictating interest rates or managing money supply growth than the Federal Reserve does for exactly the same reasons: Congress is not the free market. Any select group of people, no matter how wise and educated, simply cannot replace the wisdom of the market. HR 1207 does not seek to replace the wisdom of the Fed with the wisdom of Congress. That would be a giant step backwards. HR 1207 simply asks for full disclosure, and I am agreeable to allowing for a reasonable lag time to calm the fears that Congress intends to dictate monetary policy.
What we do want, what we insist upon, is that no longer will decisions that carry so much economic weight be made in absolute secrecy. We want to know what arrangements the Fed makes with other governments and central banks. We want to know who is benefitting from the actions of the Fed and what deals are being made. The Fed is already reacting to pressure by scaling back its liquidity facilities and returning to more traditional monetary policy through direct asset purchases. With nearly $800 billion in mortgage-backed securities on its books already, $800 billion in Treasury securities, and no real limit to what the Fed can acquire, there is a tremendous opportunity for malfeasance. We need to know who the Fed deals with, what they buy, how much they spend, and who benefits. As good as any step towards Federal Reserve transparency is, anything less than full disclosure at this point is unacceptable.
Facing A Total Breakdown Of Financial Markets
Bob Chapman
The International Forecaster
October 30, 2009
Early Friday morning, state and federal agents walked into the Bank of Elmwood and closed the failed 49-year-old independent bank after a year of struggling to improve a bleak financial situation, officials announced Friday.
featured stories Facing A Total Breakdown Of Financial Markets
gore
We have entered a phase where the Fed and the US Treasury recognize that they can no longer hold up the dollar.
The Wisconsin Department of Financial Institutions shut down the bank and turned it over to the Federal Deposit Insurance Corporation. The FDIC in turn sold it to an Oak Creek-based bank.
The FDIC entered into an agreement with the Oak Creek-based Tri City National Bank to assume all of the Bank of Elmwood deposits and assets.
As of Sept. 30, 2009, Bank of Elmwood had total assets of $327.4 million and total deposits of approximately $273.2 million.
No advance notice of the closing was given, according to FDIC officials.
Stock funds have had net outflows of capital out of the market for the past six weeks. Insiders at corporations are selling with glee. Thirty times more sell orders than buy orders. Even CALPERS, the world’s fourth largest pension fund has cut equity holdings to 49%, the lowest since 1993. British pensions have the lowest equity holdings in 35 years. This leads us to believe that, due to the character of pension plans, that long-term momentum has changed and will remain more conservative for some time to come. They could cut back much further and we may not see them on the long side in a big way until a bottom is reached and a decisive uptrend is in place. It is no wonder US Treasures are so strong. We know fiduciaries are perpetually wrong, but irrespective the trend for whatever reason is for less participation in the equity market. Maybe for once they are being smart and following the insiders who are selling 30 times more than they are buying. A recent example was the CEO of one of our short recommendations, Robert Toll, of Toll Brothers, a homebuilder, who last month sold 1.6 million shares of his company’s stock. Stock repurchases are off 65% as well.
During September and October we still saw short covering. We also see that 73% of NYSE trading was of the black box variety, program trading. There are 16 firms front-running all market trades and the SEC refuses to do anything about it, so that Goldman Sachs and JP Morgan chase can further enrich themselves, illegally. The SEC calls it flash-trading not what it really is, stealing. And, yes, the SEC still refuses to stop naked shorting, which is also illegal – another trove of riches for the anointed insiders at Illuminati run brokerage firms. The remainder of the market strength comes from banks, brokerage firms and insurance companies who are leveraging funds received from the Treasury and the Fed, some $12.7 trillion. That is what this really is all about.
This is the first time ever that the S&P 500 has ever rallied 60% in six months. The Dow reached 10,000, when it should not have exceeded 8,500. That shows you the distortion and manipulation going on and points up the now blatant activities of the President’s “Working Group on Financial Markets,” which, of course, operates in secret. As a tribute to this phony rally we have lost 2.5 million jobs over its tenure, when two million are normally created. Are there no professionals out there that get it? They cannot all be that dumb, and they are not that dumb. They are engaging in a conspiracy of silence. They want to be thought well by their peers at the club. They do not want to be ostracized in the Wall Street click. We know we were there for 28 years, of course, always on the outside looking in, permanently known as goldie. If you want to see where the US stock market is eventually going take a look at Japan from 1992 to today. 70% losses and still unable to get out of its own way with an economy still in depression. Incidentally, if the US market copies Japan, which we believe it will, we could easily fall to 3,800 to 4,200 on the Dow and we’ll be very lucky if it holds there. Others whose opinion we respect are looking for 2,800. Wall Street is pricing into the market earnings not only for 2010 but 2011 as well, which is very dangerous in such an environment. We are still in the worst credit crisis since the 1930s.
Trailing P/E on operating earnings is 27 times. When the Dow was 14,168 in 2007, it was 18.8 times. Reported trailing earnings are 180 times, whereas in 10/07, it was 23.4 times. In 10/87, it was 20.3 times. That should give you something to think about if you are in the market. Normally P/E’s should be 14.5 times. Instead of chasing an overpriced goose you should be participating in the bull markets in gold, silver and commodities. That is where safety, preservation of capital and possible large gains are to be found, both short and long term. Why fiddle with an overextended bear market rally when you can gain in relative safety. Get rid of those bonds, stocks, CDs, cash value life insurance policies and annuities, which are really uninsured and in the stock market waiting to again fall 40% to 70% in value. The crisis is not over; it is still in the beginning.
The Fed and Wall Street tell us the recession is over and soon policy actions will continue to a gradual resumption of sustainable economic growth. They see no inflation ahead, only the 1.2% presently. Needless to say, they are well aware that real inflation is 6.11%.
We mentioned CALPERS earlier on as a seller of equities. CALPERS is closely watched by other funds and they probably will influence other pension plans to follow. The plan is to become more conservative as the boomer retirement wave hits. Worldwide retirees will jump to 1.3 billion in 2040 from 500 million plus last year. That will be 14% of the total population. It is inevitable that the market will head lower soon. Funds are not dumb, they see the trend as well and they’ll also be sellers. Now the question is when?
Most professionals, investors and the public still do not understand that we are facing a total breakdown of financial markets, which in turn will take down the economy as well, and will lead to a depression of five years or more. There are no solutions; the problem should have been attended to in 1990. After June of 2002, there was no turning back. The damage inflicted will take years to heal. Those who created the crisis, who are now supposedly trying to fix it, are playing for time. Many people are realizing what the bankers and Wall Street are up too, as bubbles deflate inflation is rising. Zero interest rates certainly do not induce people to save, although savings have risen to more than 4% of GDP, as debt is aggressively being reduced. As long as money and credit is being increased, monetization increases and no purge of the problem takes place, the economy will continue to deteriorate.
The Illuminist’s plans to destroy America are coming unglued. Their puppet in the White House has monstrous problems. Plunging approval ratings, Cap & Trade legislation being held up in the Senate, medical reform that is going nowhere, massive deficits and a stimulus package that isn’t working.
An issue the elitists did not think they would have to deal with is the question of whether Obama is a citizen or not. They thought they would be able to bamboozle the public. That question has become a cause celebre. Thus, if the President’s controllers want to dump him it will be easy. They will just make sure it is finally discovered he was born in Kenya. Then it is game over. The failure of Obama will further force the Illuminists to cut back on their plans for a new world order. They will try their best to extend the time frame. The dollar devaluation, rising unemployment that brings social problems, or a breakdown in society will be avoided at all costs. This means more and bigger injections of money and credit, more monetization, more stimulus and more subsidies. That means we definitely will have hyperinflation and a falling dollar. That means gold and silver will go higher. That could mean an abandonment of a green policy, and the failure of Cap & Trade, healthcare reform and Copenhagen. We will have to see how things develop.
From here on out the Fed isn’t going to get away with anything. Anyone who has been in the market for any length of time knows all of our current problems emanated straight from the fed. It is now obvious that the take down of the dollar is deliberate and there is little effort to save it; just an effort to bring it down slowly and incrementally. There is no question banks will continue to get cheap loans and either deposit the money with the Fed for a 3% gain to buy Treasuries or opportune the markets. An increase in interest rates is a year or more off. Higher rates mean a collapse not only in the economy, but in credit derivatives as well – some $600 billion worth. Besides who wants mortgage rates back up to 6-1/2% to 7%? That would send housing prices lower and unsold inventories higher and that would destroy bank balance sheets. That also means the phantom inventory would become much more visible. That would collapse many banks. We say no change in rates for a year or more. Next enters the dollar carry trade and once it ends the dollar will collapse and that should coincide with the official dollar devaluation, default and bank holiday. It is no wonder foreigners are issuing bonds in US dollars to capture the depreciation. Eventually this will lead to US tariffs on goods and services and trade war. It will also bring an end to the fraud and monetization. Either the US purges their financial system or no one will accept dollars. That is when monetization will finally end.
Is it any wonder some nations are buying gold, particularly China. We now have a Chinese put on gold just as the US stock market once had a Greenspan put to keep it at ridiculously high levels. The Chinese are working with an element that has been suppressed since 1968. We now know that from documents released via the FOIA. We saw it in secret gold sales in 1987 via London. Then we were subject to the President’s “Working Group on Financial Markets” since 1988. The suppression of the gold price by the US and UK all those years has made gold extremely cheap. Thus the Chinese have the perfect vehicle to dump their dollars into. Every time the US Treasury knocks gold down China and others are there as buyers.
Gold has entered phase 2, which we described in 2000. Phase 2 will carry to $2,500 to $3,000. That should be followed by phase 3 to $6,700. That will then allow gold to reflect real inflation since 1980. Needless to say, in 2000 we had no idea that China would be the propellant to move gold higher. As you know 96% of letter writers, analysts and economists have stated gold will fall below $1,000 again. They are wrong and as usual they will continue to be wrong. They cannot understand that this is psycho-political warfare and there are no rules. He who has the gold makes the rules. They all believe this is transitory and we will go back to business as usual. That is not the way it is going to be. The US is finished as an international imperial power. We wish it was otherwise, but those are the facts. The elitists who control our economies and financial system have deliberately destroyed it in order to bring about world government. Once these mallet heads understand what the game is they will realize where this is headed. Just stop and think, is it normal for a bank to leave lending at 8 to 10 to one of deposits to lend at 40 to one, as the Fed cheers them on? Of course not. Bankers know that is suicidal. So why did they do so? And, why are they still leveraged at those levels? It is because the big banks controlled by the Illuminists want the system to collapse in order to force Americans and Europeans to accept world government. If you can think of another reason let us know. These people are not stupid. They know exactly what they are doing. We wrote an article for Bull & Bear in August 1988, that described the new manipulation of the gold market, but no one was listening. Finally ten years later others discovered what we had discovered long before. Finally today many understand what the elitists are really up too. Even they though don’t understand the end game. If they do they are not writing about it.
We have entered a phase where the Fed and the US Treasury recognize that they can no longer hold up the dollar. They can only impede its downward progress. In that process US and British transnational conglomerates can make even more money by paying for goods in dollars and shorting the dollar simultaneously. This process began at the beginning of the year led by the Chinese and as a result Forex reserves of foreign central banks fell from 64.5% to 62.8% in dollar terms.
Those events have been accompanied by a flight into other currencies and gold and the use of the dollar in the carry trade. Zero US interest rates will stay at that level indefinitely irrespective of the inflation that will rage in the US and be transported worldwide. Once the dollar falls to long-term support at 71.18 to 72 on the USDX, there will probably be a rally and a retest. Sometime in 2010, 71.18 will be broken to the downside and we will then find out where the real bottom on the dollar will be. It could be 40 to 55, we won’t know until we get there. That is when official devaluation and default will occur, not only in the US dollar but in many other currencies. That will cause financial chaos worldwide and you had better have gold and silver if you want to survive.
The International Forecaster
October 30, 2009
Early Friday morning, state and federal agents walked into the Bank of Elmwood and closed the failed 49-year-old independent bank after a year of struggling to improve a bleak financial situation, officials announced Friday.
featured stories Facing A Total Breakdown Of Financial Markets
gore
We have entered a phase where the Fed and the US Treasury recognize that they can no longer hold up the dollar.
The Wisconsin Department of Financial Institutions shut down the bank and turned it over to the Federal Deposit Insurance Corporation. The FDIC in turn sold it to an Oak Creek-based bank.
The FDIC entered into an agreement with the Oak Creek-based Tri City National Bank to assume all of the Bank of Elmwood deposits and assets.
As of Sept. 30, 2009, Bank of Elmwood had total assets of $327.4 million and total deposits of approximately $273.2 million.
No advance notice of the closing was given, according to FDIC officials.
Stock funds have had net outflows of capital out of the market for the past six weeks. Insiders at corporations are selling with glee. Thirty times more sell orders than buy orders. Even CALPERS, the world’s fourth largest pension fund has cut equity holdings to 49%, the lowest since 1993. British pensions have the lowest equity holdings in 35 years. This leads us to believe that, due to the character of pension plans, that long-term momentum has changed and will remain more conservative for some time to come. They could cut back much further and we may not see them on the long side in a big way until a bottom is reached and a decisive uptrend is in place. It is no wonder US Treasures are so strong. We know fiduciaries are perpetually wrong, but irrespective the trend for whatever reason is for less participation in the equity market. Maybe for once they are being smart and following the insiders who are selling 30 times more than they are buying. A recent example was the CEO of one of our short recommendations, Robert Toll, of Toll Brothers, a homebuilder, who last month sold 1.6 million shares of his company’s stock. Stock repurchases are off 65% as well.
During September and October we still saw short covering. We also see that 73% of NYSE trading was of the black box variety, program trading. There are 16 firms front-running all market trades and the SEC refuses to do anything about it, so that Goldman Sachs and JP Morgan chase can further enrich themselves, illegally. The SEC calls it flash-trading not what it really is, stealing. And, yes, the SEC still refuses to stop naked shorting, which is also illegal – another trove of riches for the anointed insiders at Illuminati run brokerage firms. The remainder of the market strength comes from banks, brokerage firms and insurance companies who are leveraging funds received from the Treasury and the Fed, some $12.7 trillion. That is what this really is all about.
This is the first time ever that the S&P 500 has ever rallied 60% in six months. The Dow reached 10,000, when it should not have exceeded 8,500. That shows you the distortion and manipulation going on and points up the now blatant activities of the President’s “Working Group on Financial Markets,” which, of course, operates in secret. As a tribute to this phony rally we have lost 2.5 million jobs over its tenure, when two million are normally created. Are there no professionals out there that get it? They cannot all be that dumb, and they are not that dumb. They are engaging in a conspiracy of silence. They want to be thought well by their peers at the club. They do not want to be ostracized in the Wall Street click. We know we were there for 28 years, of course, always on the outside looking in, permanently known as goldie. If you want to see where the US stock market is eventually going take a look at Japan from 1992 to today. 70% losses and still unable to get out of its own way with an economy still in depression. Incidentally, if the US market copies Japan, which we believe it will, we could easily fall to 3,800 to 4,200 on the Dow and we’ll be very lucky if it holds there. Others whose opinion we respect are looking for 2,800. Wall Street is pricing into the market earnings not only for 2010 but 2011 as well, which is very dangerous in such an environment. We are still in the worst credit crisis since the 1930s.
Trailing P/E on operating earnings is 27 times. When the Dow was 14,168 in 2007, it was 18.8 times. Reported trailing earnings are 180 times, whereas in 10/07, it was 23.4 times. In 10/87, it was 20.3 times. That should give you something to think about if you are in the market. Normally P/E’s should be 14.5 times. Instead of chasing an overpriced goose you should be participating in the bull markets in gold, silver and commodities. That is where safety, preservation of capital and possible large gains are to be found, both short and long term. Why fiddle with an overextended bear market rally when you can gain in relative safety. Get rid of those bonds, stocks, CDs, cash value life insurance policies and annuities, which are really uninsured and in the stock market waiting to again fall 40% to 70% in value. The crisis is not over; it is still in the beginning.
The Fed and Wall Street tell us the recession is over and soon policy actions will continue to a gradual resumption of sustainable economic growth. They see no inflation ahead, only the 1.2% presently. Needless to say, they are well aware that real inflation is 6.11%.
We mentioned CALPERS earlier on as a seller of equities. CALPERS is closely watched by other funds and they probably will influence other pension plans to follow. The plan is to become more conservative as the boomer retirement wave hits. Worldwide retirees will jump to 1.3 billion in 2040 from 500 million plus last year. That will be 14% of the total population. It is inevitable that the market will head lower soon. Funds are not dumb, they see the trend as well and they’ll also be sellers. Now the question is when?
Most professionals, investors and the public still do not understand that we are facing a total breakdown of financial markets, which in turn will take down the economy as well, and will lead to a depression of five years or more. There are no solutions; the problem should have been attended to in 1990. After June of 2002, there was no turning back. The damage inflicted will take years to heal. Those who created the crisis, who are now supposedly trying to fix it, are playing for time. Many people are realizing what the bankers and Wall Street are up too, as bubbles deflate inflation is rising. Zero interest rates certainly do not induce people to save, although savings have risen to more than 4% of GDP, as debt is aggressively being reduced. As long as money and credit is being increased, monetization increases and no purge of the problem takes place, the economy will continue to deteriorate.
The Illuminist’s plans to destroy America are coming unglued. Their puppet in the White House has monstrous problems. Plunging approval ratings, Cap & Trade legislation being held up in the Senate, medical reform that is going nowhere, massive deficits and a stimulus package that isn’t working.
An issue the elitists did not think they would have to deal with is the question of whether Obama is a citizen or not. They thought they would be able to bamboozle the public. That question has become a cause celebre. Thus, if the President’s controllers want to dump him it will be easy. They will just make sure it is finally discovered he was born in Kenya. Then it is game over. The failure of Obama will further force the Illuminists to cut back on their plans for a new world order. They will try their best to extend the time frame. The dollar devaluation, rising unemployment that brings social problems, or a breakdown in society will be avoided at all costs. This means more and bigger injections of money and credit, more monetization, more stimulus and more subsidies. That means we definitely will have hyperinflation and a falling dollar. That means gold and silver will go higher. That could mean an abandonment of a green policy, and the failure of Cap & Trade, healthcare reform and Copenhagen. We will have to see how things develop.
From here on out the Fed isn’t going to get away with anything. Anyone who has been in the market for any length of time knows all of our current problems emanated straight from the fed. It is now obvious that the take down of the dollar is deliberate and there is little effort to save it; just an effort to bring it down slowly and incrementally. There is no question banks will continue to get cheap loans and either deposit the money with the Fed for a 3% gain to buy Treasuries or opportune the markets. An increase in interest rates is a year or more off. Higher rates mean a collapse not only in the economy, but in credit derivatives as well – some $600 billion worth. Besides who wants mortgage rates back up to 6-1/2% to 7%? That would send housing prices lower and unsold inventories higher and that would destroy bank balance sheets. That also means the phantom inventory would become much more visible. That would collapse many banks. We say no change in rates for a year or more. Next enters the dollar carry trade and once it ends the dollar will collapse and that should coincide with the official dollar devaluation, default and bank holiday. It is no wonder foreigners are issuing bonds in US dollars to capture the depreciation. Eventually this will lead to US tariffs on goods and services and trade war. It will also bring an end to the fraud and monetization. Either the US purges their financial system or no one will accept dollars. That is when monetization will finally end.
Is it any wonder some nations are buying gold, particularly China. We now have a Chinese put on gold just as the US stock market once had a Greenspan put to keep it at ridiculously high levels. The Chinese are working with an element that has been suppressed since 1968. We now know that from documents released via the FOIA. We saw it in secret gold sales in 1987 via London. Then we were subject to the President’s “Working Group on Financial Markets” since 1988. The suppression of the gold price by the US and UK all those years has made gold extremely cheap. Thus the Chinese have the perfect vehicle to dump their dollars into. Every time the US Treasury knocks gold down China and others are there as buyers.
Gold has entered phase 2, which we described in 2000. Phase 2 will carry to $2,500 to $3,000. That should be followed by phase 3 to $6,700. That will then allow gold to reflect real inflation since 1980. Needless to say, in 2000 we had no idea that China would be the propellant to move gold higher. As you know 96% of letter writers, analysts and economists have stated gold will fall below $1,000 again. They are wrong and as usual they will continue to be wrong. They cannot understand that this is psycho-political warfare and there are no rules. He who has the gold makes the rules. They all believe this is transitory and we will go back to business as usual. That is not the way it is going to be. The US is finished as an international imperial power. We wish it was otherwise, but those are the facts. The elitists who control our economies and financial system have deliberately destroyed it in order to bring about world government. Once these mallet heads understand what the game is they will realize where this is headed. Just stop and think, is it normal for a bank to leave lending at 8 to 10 to one of deposits to lend at 40 to one, as the Fed cheers them on? Of course not. Bankers know that is suicidal. So why did they do so? And, why are they still leveraged at those levels? It is because the big banks controlled by the Illuminists want the system to collapse in order to force Americans and Europeans to accept world government. If you can think of another reason let us know. These people are not stupid. They know exactly what they are doing. We wrote an article for Bull & Bear in August 1988, that described the new manipulation of the gold market, but no one was listening. Finally ten years later others discovered what we had discovered long before. Finally today many understand what the elitists are really up too. Even they though don’t understand the end game. If they do they are not writing about it.
We have entered a phase where the Fed and the US Treasury recognize that they can no longer hold up the dollar. They can only impede its downward progress. In that process US and British transnational conglomerates can make even more money by paying for goods in dollars and shorting the dollar simultaneously. This process began at the beginning of the year led by the Chinese and as a result Forex reserves of foreign central banks fell from 64.5% to 62.8% in dollar terms.
Those events have been accompanied by a flight into other currencies and gold and the use of the dollar in the carry trade. Zero US interest rates will stay at that level indefinitely irrespective of the inflation that will rage in the US and be transported worldwide. Once the dollar falls to long-term support at 71.18 to 72 on the USDX, there will probably be a rally and a retest. Sometime in 2010, 71.18 will be broken to the downside and we will then find out where the real bottom on the dollar will be. It could be 40 to 55, we won’t know until we get there. That is when official devaluation and default will occur, not only in the US dollar but in many other currencies. That will cause financial chaos worldwide and you had better have gold and silver if you want to survive.
Monday, October 26, 2009
Are You Ready for the Next Crisis?
Paul Craig Roberts
Infowars
October 26, 2009
Evidence that the US is a failed state is piling up faster than I can record it.
One conclusive hallmark of a failed state is that the crooks are inside the government, using government to protect and to advance their private interests.
Another conclusive hallmark is rising income inequality as the insiders manipulate economic policy for their enrichment at the expense of everyone else.
The Banksters are still in charge.
Income inequality in the US is now the most extreme of all countries. The 2008 OECD report, “Income Distribution and Poverty in OECD Countries,” [ PDF]concludes that the US is the country with the highest inequality and poverty rate across the OECD and that since 2000 nowhere has there been such a stark rise in income inequality as in the US.
The OECD finds that in the US the distribution of wealth is even more unequal than the distribution of income.
On October 21, 2009, Business Week reported that a new report from the United Nations Development Program concluded that the US ranked third among states with the worst income inequality. As number one and number two, Hong Kong and Singapore, are both essentially city states, not countries, the US actually has the shame of being the country with the most inequality in the distribution of income.
The stark increase in US income inequality in the 21st century coincides with the offshoring of US jobs, which enriched executives with “performance bonuses” while impoverishing the middle class, and with the rapid rise of unregulated OTC derivatives, which enriched Wall Street and the financial sector at the expense of everyone else.
Millions of Americans have lost their homes and half of their retirement savings while being loaded up with government debt to bail out the banksters who created the derivative crisis.
Frontline’s October 21 broadcast, “The Warning,” documents how Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, Deputy Treasury Secretary Larry Summers, and Securities and Exchange Commission Chairman Arthur Levitt blocked Brooksley Born, head of the Commodity Futures Trading Commission, from performing her statutory duties and regulating OTC derivatives.
After the worst crisis in US financial history struck, just as Brooksley Born said it would, a disgraced Alan Greenspan was summoned out of retirement to explain to Congress his unequivocal assurances that no regulation of derivatives was necessary. Greenspan had even told Congress that regulation of derivatives would be harmful. A pathetic Greenspan had to admit that the free market ideology on which he had relied turned out to have a flaw.
Greenspan may have bet our country on his free market ideology, but does anyone believe that Rubin and Summers were doing anything other than protecting the enormous fraud-based profits that derivatives were bringing Wall Street? As Brooksley Born stressed, OTC derivatives are a “dark market.” There is no transparency. Regulators have no information on them and neither do purchasers.
Even after Long Term Capital Management blew up in 1998 and had to be bailed out, Greenspan, Rubin, and Summers stuck to their guns. Greenspan, Rubin and Summers, and a roped-in gullible Arthur Levitt who now regrets that he was the banksters’ dupe, succeeded in manipulating a totally ignorant Congress into blocking the CFTC from doing its mandated job. Brooksley Born, prevented by the public’s elected representatives from protecting the public, resigned. Wall Street money simply shoved facts and honest regulators aside, guaranteeing government inaction and the financial crisis that hit in 2008 and continues to plague our economy today.
The financial insiders running the Treasury, White House, and Federal Reserve shifted to taxpayers the cost of the catastrophe that they had created. When the crisis hit, Henry Paulson, appointed by President Bush as Rubin’s replacement as the Goldman Sachs representative running the US Treasury, hyped fear to obtain from “our” representatives in Congress with no questions asked hundreds of billions of taxpayers’ dollars (TARP money) to bail out Goldman Sachs and the other malefactors of unregulated derivatives.
When Goldman Sachs recently announced that it was paying massive six- and seven-figure bonuses to every employee, public outrage erupted. In defense of banksters, saved with the public’s money, paying themselves bonuses in excess of most people’s life-time earnings, Lord Griffiths, Vice Chairman of Goldman Sachs International, said that the public must learn to “tolerate the inequality as a way to achieve greater prosperity for all.”[Public must learn to 'tolerate the inequality' of bonuses, says Goldman Sachs vice-chairman]
In other words, “Let them eat cake.”
According to the UN report cited above, Great Britain has the 7th most unequal income distribution in the world. After the Goldman Sachs bonuses, the British will move up in distinction, perhaps rivalling Israel for the fourth spot in the hierarchy.
Despite the total insanity of unregulated derivatives, the high level of public anger, and Greenspan’s confession to Congress, still nothing has been done to regulate derivatives.
One of Rubin’s Assistant Treasury Secretaries, Gary Gensler, has replaced Brooksley Born as head of the CFTC. Larry Summers is the head of President Obama’s National Economic Council. Former Federal Reserve official Timothy Geithner, a Paulson protege, runs the Obama Treasury. A Goldman Sachs vice president, Adam Storch, has been appointed the chief operating officer of the Securities and Exchange Commission.
The Banksters are still in charge.
Is there another country in which in full public view so few so blatantly use government for the enrichment of private interests, with a coterie of “free market” economists available to justify plunder on the grounds that “the market knows best”?
A narco-state is bad enough. The US surpasses this horror with its financo-state.
As Brooksley Born says, if nothing is done, “it’ll happen again.”
But nothing can be done. The crooks have the government.
[PCR Note: The OECD report shows that despite the Reagan tax rate reduction, the rate of increase in US income inequality declined during the Reagan years. During the mid-1990s the Gini coefficient (the measure of income inequality) actually fell. Beginning in 2000 with the New Economy (essentially financial fraud and offshoring of US jobs
Infowars
October 26, 2009
Evidence that the US is a failed state is piling up faster than I can record it.
One conclusive hallmark of a failed state is that the crooks are inside the government, using government to protect and to advance their private interests.
Another conclusive hallmark is rising income inequality as the insiders manipulate economic policy for their enrichment at the expense of everyone else.
The Banksters are still in charge.
Income inequality in the US is now the most extreme of all countries. The 2008 OECD report, “Income Distribution and Poverty in OECD Countries,” [ PDF]concludes that the US is the country with the highest inequality and poverty rate across the OECD and that since 2000 nowhere has there been such a stark rise in income inequality as in the US.
The OECD finds that in the US the distribution of wealth is even more unequal than the distribution of income.
On October 21, 2009, Business Week reported that a new report from the United Nations Development Program concluded that the US ranked third among states with the worst income inequality. As number one and number two, Hong Kong and Singapore, are both essentially city states, not countries, the US actually has the shame of being the country with the most inequality in the distribution of income.
The stark increase in US income inequality in the 21st century coincides with the offshoring of US jobs, which enriched executives with “performance bonuses” while impoverishing the middle class, and with the rapid rise of unregulated OTC derivatives, which enriched Wall Street and the financial sector at the expense of everyone else.
Millions of Americans have lost their homes and half of their retirement savings while being loaded up with government debt to bail out the banksters who created the derivative crisis.
Frontline’s October 21 broadcast, “The Warning,” documents how Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, Deputy Treasury Secretary Larry Summers, and Securities and Exchange Commission Chairman Arthur Levitt blocked Brooksley Born, head of the Commodity Futures Trading Commission, from performing her statutory duties and regulating OTC derivatives.
After the worst crisis in US financial history struck, just as Brooksley Born said it would, a disgraced Alan Greenspan was summoned out of retirement to explain to Congress his unequivocal assurances that no regulation of derivatives was necessary. Greenspan had even told Congress that regulation of derivatives would be harmful. A pathetic Greenspan had to admit that the free market ideology on which he had relied turned out to have a flaw.
Greenspan may have bet our country on his free market ideology, but does anyone believe that Rubin and Summers were doing anything other than protecting the enormous fraud-based profits that derivatives were bringing Wall Street? As Brooksley Born stressed, OTC derivatives are a “dark market.” There is no transparency. Regulators have no information on them and neither do purchasers.
Even after Long Term Capital Management blew up in 1998 and had to be bailed out, Greenspan, Rubin, and Summers stuck to their guns. Greenspan, Rubin and Summers, and a roped-in gullible Arthur Levitt who now regrets that he was the banksters’ dupe, succeeded in manipulating a totally ignorant Congress into blocking the CFTC from doing its mandated job. Brooksley Born, prevented by the public’s elected representatives from protecting the public, resigned. Wall Street money simply shoved facts and honest regulators aside, guaranteeing government inaction and the financial crisis that hit in 2008 and continues to plague our economy today.
The financial insiders running the Treasury, White House, and Federal Reserve shifted to taxpayers the cost of the catastrophe that they had created. When the crisis hit, Henry Paulson, appointed by President Bush as Rubin’s replacement as the Goldman Sachs representative running the US Treasury, hyped fear to obtain from “our” representatives in Congress with no questions asked hundreds of billions of taxpayers’ dollars (TARP money) to bail out Goldman Sachs and the other malefactors of unregulated derivatives.
When Goldman Sachs recently announced that it was paying massive six- and seven-figure bonuses to every employee, public outrage erupted. In defense of banksters, saved with the public’s money, paying themselves bonuses in excess of most people’s life-time earnings, Lord Griffiths, Vice Chairman of Goldman Sachs International, said that the public must learn to “tolerate the inequality as a way to achieve greater prosperity for all.”[Public must learn to 'tolerate the inequality' of bonuses, says Goldman Sachs vice-chairman]
In other words, “Let them eat cake.”
According to the UN report cited above, Great Britain has the 7th most unequal income distribution in the world. After the Goldman Sachs bonuses, the British will move up in distinction, perhaps rivalling Israel for the fourth spot in the hierarchy.
Despite the total insanity of unregulated derivatives, the high level of public anger, and Greenspan’s confession to Congress, still nothing has been done to regulate derivatives.
One of Rubin’s Assistant Treasury Secretaries, Gary Gensler, has replaced Brooksley Born as head of the CFTC. Larry Summers is the head of President Obama’s National Economic Council. Former Federal Reserve official Timothy Geithner, a Paulson protege, runs the Obama Treasury. A Goldman Sachs vice president, Adam Storch, has been appointed the chief operating officer of the Securities and Exchange Commission.
The Banksters are still in charge.
Is there another country in which in full public view so few so blatantly use government for the enrichment of private interests, with a coterie of “free market” economists available to justify plunder on the grounds that “the market knows best”?
A narco-state is bad enough. The US surpasses this horror with its financo-state.
As Brooksley Born says, if nothing is done, “it’ll happen again.”
But nothing can be done. The crooks have the government.
[PCR Note: The OECD report shows that despite the Reagan tax rate reduction, the rate of increase in US income inequality declined during the Reagan years. During the mid-1990s the Gini coefficient (the measure of income inequality) actually fell. Beginning in 2000 with the New Economy (essentially financial fraud and offshoring of US jobs
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