A “perfect storm” of fiscal woes in the United States, a slowdown in China, the debt crisis in Europe and stagnation in Japan has a decent chance of damaging the global economy by 2013, Roubini told reporters late last week. Even so, he is being quite conservative about it. A 33% chance doesn’t seem like news to me. All this by New York University professor Nouriel Roubini, who correctly predicted the global economic crisis in 2008.
According to Mr. Roubini, the world economy expansion may slow in the second half of this year as “the deleveraging process continues, fiscal stimulus is withdrawn and confidence ebbs.” To me, this seems obvious. This process is really part of what is already happening. It’s not news. The job market stinks in the U.S. and other modern nations. Money isn’t being made abundantly in the real economy. It’s all on Wall Street and in the investment world, based on heavy borrowing and debt restructuring of nations based on fiat money. Washington has been unwilling to deal with a one-trillion-plus budget deficit and a distinct bond market revolt is in the wings. Investors are waking up to the danger to their investment as US bonds are in danger of becoming junk. This will create higher interest rates and possible hyperinflation, which will remove any possibility of a recovery, even resulting the destruction of the dollar for an international medium of exchange. The bankers aren’t truly bothered by this. Based on inside information, the bankers already have a plan in the wings that I have touched on previously. It’s all about marketing, presentation to them.
Already, we have riots in Greece, as they face the music regarding the bad debt that the nation and bankers have created. They claim that officials need to restructure the debt of Greece, Ireland and Portugal. Waiting too long will ultimately result in the disintegration of the euro zone stability, experts say. Roubini agrees. The ridiculous aspect to the entire scenario is that all banking debt in the current system that is created will never be paid back. Further, much of this debt has been cleverly folded into Wall Street investments with the idea of making money, either through long or short selling. But this does not solve the problem of any debt unless the nations involved have the ability to make money by having control. They don’t. Only the bankers make money on any debt. In the meantime, these nations are paying on interest, not on principal. It’s stupid. The spiral never ends. Roubini and most economists remain silent on this aspect of the system.
Many other analysts, like myself, have repeatedly warned of a “possible” repeat of the 2008 global economic meltdown in the immediate future. Others, like Moscow financial expert Alexander Osin expresses hope that the international community will be able to find the way out. Russian economist Konstantin Sonin warns against overdramatizing the situation since people like Roubini are full of it, false prophets, in essence. The solution?
“The world economy faced such a problem in the 1930s,” Osin says, adding that Adolf Hitler’s ascent to power and the beginning of World War Two helped to resolve the problem. “At present, it should be solved by peaceful means, which the global community is almost certain to find.” Certainly, the Russians and Arabs are doing quite well since they are sitting on oil profits. That will only last as long as the current monetary gaming system does. That is the problem behind the whole matter. An eternal debt-based banking system destroys the nations that depend on it unless they are sitting on huge cash cow. Rest assured, that is temporary. If they are doing business with the bankers, the banking system will drain that wealth too. That is the nature of the system in place, as well as the nature of the future system.
So, to solve the problem we need a global war and preferably another Hitler. In the meantime, resolving the monetary system crisis is all about “hope,” and now we are listening to Russians for economic advice. The global economy really is in trouble. There won’t be any gain without plenty of pain. Never mind the pain that so many are in now.
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The Federal Reserve has been mandated by Congress to reduce unemployment while holding their interest rate near zero. They plan to buy $600 billion in Treasury securities to keep prices from falling and reduce further the long-term borrowing costs, even as 8,000 commercial banks are being locked out of the money flow that could be used to begin financial healing on Main Street.
Bernanke plans to use the tools created during the recession to pump life into the USA economy. They have been projecting that the USA economy has been expanding for 15 months, but not to their satisfaction. They want the USA economy to grow at a larger rate. The reaction of the market has caused the dollar to fall and stocks to rise, as if Wall Street is a true measure of the USA economy. The focus is on Wall Street. Main Street be damned.
Bernanke hopes that he can encourage Wall Street investors to take more risks without risking inflation or encouraging price bubbles of assets by pushing the unemployment rate, which has been above 9 percent since June 2009.
Allen Sinai, the chief global economist at Decision Economics Inc. in New York claims that the Federal Reserve is not working up to standard. He criticized that they are paid to do the job more effectively, but their work is not up to standard. The fact remains that no human institution is truly equipped to deal with the crisis. We are in new economic territory with a global currency at stake, currently propped up by Wall Street as a distraction from the truth.
To push the rate of unemployment down, the central bank wants to spur the rate of US economic growth above a 2.5 annual growth rate.
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On a very regular basis, Treasury Secretary Tim Geithner engages in magical thinking with deliberate attempts to delude American workers into believing that business investment and consumer demand are on the uptick. Geithner’s pretense isn’t only disingenuous and disrespectful, but dangerous. How? He continually suggests that American consumers should feel comfortable borrowing and spending in the vain hope of spurring any hope of economic bright light.
Mr. Geithner needs to stop with the tim-foolery as these truths hang over our nation like a plague:
- The real unemployment rate is 18.3%, instead of the 9.5% rate the administration uses.
- The number of real unemployed workers in all four categories of unemployment is no less than 29.3 million, instead of the administration’s one-category-only figure of 14.6 million.
- In real terms the all-important “jobs gap” is 21.3 million new jobs.
- Since the start of the Obama administration, the number of real unemployed workers has increased by 4.6 million. The U.S. economy needs to add 150,000 new jobs each month simply to keep up with “population growth.”
- For unemployment benefits, the average number of weeks unemployed is at least 34 and the number of workers unemployed a half year or longer is at least 10.1 million.
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Fed Governor Fred Mishkin stated today that “There can hardly be a better time to make the case for economic and financial literacy than right now…We face a downturn in our housing industry fueled, at least in part, by unwise mortgage borrowing and, at times, abusive lending practices. Improving consumers’ knowledge of the home mortgage process will better equip them to avoid unsuitable mortgages in the future.” While this speech was largely aimed at a new public service program for the everyday financial consumer, it could have just as well been aimed at the bankers and financial gurus that ply their trade every day.
The Federal Reserve is on a mission to increase public knowledge and appear more consumer friendly, garnering helpful bits of consumer advice for education. With the Federal Reserve’s recent elevation of power within and around this economic system, the Fed has now graduated to the role of the nation’s “financial grandfather”.
What is this financial literacy that is so important? ‘Economic and financial literacy’ is the ability to identify economic problems, alternatives, costs, and benefits. This literacy is able to analyze the incentives at work in economic situations and examine the consequences of changes in economic conditions and public policies. This literacy involves collecting and organizing economic evidence and weighing costs against benefits.’ While most average folks meet the first part of the definition pretty well, the last part of the definition can be especially daunting, especially when you lack critical thinking skills. Who doesn’t lack the skills described in some way? When you realize that this is part of a consumer campaign, you also quickly realize that the Federal Reserve also seeks to educate the very people that put this economy in the mess it is in to begin with. Based on what the Fed has said and the definition involved, you can see that most banking and financial types fall far short of meeting optimal requirements just like you might.
There is one curiosity. In each document that is officially proposed by the Federal Reserve in the last several years, you will find no hint of morality, at least not directly. The money business is simply a process. There is no talk of accountability in any true sense or a display of right or wrong. Never once have I heard the word “integrity” in context with banking and finance. That is the problem. The definition of economic and financial literacy is amoral. It can be applied any number of ways. This literacy theory can be applied for the common good of mankind or using some kind of national responsibility. This is probably the perception of most Americans. When you listen to the high-minded philosophy of the founding father of this country, you simply draw the conclusion that those ideals are still alive and well. Within that same theory also reside the very seeds of destruction. All the constituent parts of that definition fit very well in the current mindset of the banking and financial industry: the desire for wild profits and good times. The literacy theory can be applied in the most selfish and manipulative ways depending on the mindset of the individual exercising it. Live for today and to heck with tomorrow.
The Federal Reserve clearly knows the truth behind the scenes. They aren’t beating their brains out with the banking community. They figure that since there are a few torched fingers around from banking avarice, a temporary lesson might be learned for the short-term while the lawmakers figure out the latest regulations to make it all better so that the world can be saved. How much more effective to educate the everyday man so that he can keep himself out of trouble? Arm the little guy with more information while putting more responsibility on him to do the right thing. If you put enough sage financial advice out there, maybe you can blame the consumer. The new spirit of financial education is let the buyer beware. The bankers and financial gurus are going to forget the lesson of this last financial tsunami soon enough and will find a new way to stretch the rules in their favor. In the meantime, maybe some of the sage advice being dispensed will stick and those consumers that aren’t living for today might heed the call to responsibility. You think?
The Federal Reserve isn’t interested in morality; just making more money and putting a kind face on it. That is corporate elitism at its very finest.
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Banking your life on the morality and goodwill of bankers is a dangerous way to live. Yet, many people have become entirely dependent on the main asset that they hold: their home. With the creative lending in existence, it’s a wonder that that people can’t see that they are at the mercy of the bankers goodwill and profiteering in order to survive or bolster their lifestyles. Ranging from reverse-mortgages for the retired to regular home equity loans, the bankers offer to bankroll for any purpose that holds your house as collateral. The problem with this kind of thinking is that bankers are not thinking of the asset itself, only the perceived value. Even in a stable housing market, in the event of a default or major catastrophe, the bank is always left holding the bag. Admittedly, banks hate to hold real estate. Banks will often liquidate at fire sale prices to get real estate off of their books since real estate does not generate interest.
With the Countrywide mortgage debacle and the subprime mortgage bubble bust, banks find themselves in a world of hurt. Wells Fargo, Washington Mutual and JPMorgan Chase released statements Friday saying they have also started halting equity lines because of tumbling home values. Recent declines in property values have stripped many local homeowners of personal safety nets as lenders freeze lines of credit. Even borrowers that are current on payments are being cut off because of declining values.
The reality is that bankers don’t really want your home, real estate or your affection. They want your interest, a stake in your assets and security for your debt.
FDIC Speech on Loan Modifications