Busted: Bankers and The Global Economy

January 23, 2009

U.S. Employment and Recovery Dilemna

The U.S. government is in denial of classic facts the majority of the time. Even though Barack Obama has been reasonably honest concerning the immediate future, the figures he used before the inauguration to promote his plans to Congress are hopelessly underestimated and fail to add up on a mathematical level. In the meantime, Americans have the magic and charisma of a new president to chart the uncertain tragic waters of what will ultimately be a recovery given enough time. However the bad news and underlying economic factors coming out of 2008 do not speak of a speedy recovery on any level. When Barack Obama suggests that the American population in general will sacrifice, he isn’t kidding. Even the most optimistic reports paint “a bleak economic landscape ahead” with real unemployment approaching 18% with a sudden increase expected (see recent Digital Economy articles for more details).

Bankers have seen the massive destruction of their net worth and the ability to conduct business. As a result, so have we all. What was your hard-earned 401K last year? What was your net worth two years ago? The Bush administration had only seen to slowly respond to the crisis in addition to adding sweet Federal Reserve liquidity to keep failing institutions and most of the relevant power structure in place solvent. They used laissez-faire economics as an excuse to do little or nothing until their hand was forced by extreme circumstances and the national plight of total economic failure. Henry Paulson admitted his team’s inability to find and deal with the real scope of the national banking toxic-debt, instead choosing the easy course of simply recaptalizing bank with nationalized capital from taxpayers. As a confessed seasoned professional insider, Paulson was unable to determine or realize the full extent of the national collateral damage or he simply isn’t saying, which may be closer to the truth.

America has this plight to look forward to in 2009 barring other unforeseen issues:
* A huge rush of residential housing mortgage failures due to ‘housing resets’, the blight of unemployment and the inability for Americans to qualify for loans because of tightening banking rules which were conveniently ignored previously.
* A tsunami of commercial mortgage foreclosures.
* Billions in credit card defaults that threaten to further decimate the banking system coupled with banking cutbacks in anticipation of the same.
* As unemployment skyrockets, a tsunami of auto repossessions and loan defaults.
* Economic decimation through toxic banking instruments and complex debt instruments combined with $500 trillion in unmanageable credit default swaps.

25% real unemployment is realistic by the summer of 2009, near the estimated high of depression unemployment charted in the 1930s.  Unhappily, the resulting fallout will simply get worse and the economy spirals downward as more unpredicted events occur. Some areas in close relation to the Big Three automakers could see unemployment much higher than that. This commentary just touches the beginning as municipalities and states sink into further debt this year. The nation that used to live on credit will truly be living on credit in order to sustain America on any level. The profitaking of the last decade coupled with predatory banking designs has truly taken its toll. The U.S. economy didn’t have enough energy to maintain a stagflation last year. Deflation will be the ultimate result as the nation pulls into recovery years down the road. These are likely the unpleasant facts unless central bankers have a better idea. That is unlikely unless they start thinking outside the box they have built. ~ E. Manning

credit-default-swap

January 11, 2009

Unemployment: Is Obama’s Stimulus Enough?

unemployment-officeBarack Obama has projected that his future economic stimulus plan will create nearly 3.7 million jobs by the end of 2010, mainly in construction, leisure services and manufacturing. His plan is supposed to lower the unemployment rate by 1.8% by 2010. Yet, most intelligent Americans and experts alike see plenty of hard times ahead.
read complete article at TNTalk!

Unemployment: Jiggering with Accounting

January 9, 2009

A TARP Bailout Program for Consumers?

furrowed political brows

furrowed political brows

The failed U.S. TARP bailout program legislated by the EESA last year has been ungoing review by the Obama Ascension Team and the likes of Treasury Secretary-elect Timothy Geithner, former Fed member and sycophant. Furrowed brows and eye bags have become a way of life in politics. Managing the program has become an impossible and failed task. President Obama will be responsible for determining what to do with the remaining unspent TARP funds. The Obama Team is examining ways to expand the government program to generate loans to municipalities, small businesses and consumers.

Many in Congress seem to agree that the existing government program should be revamped rather than refunded. Many elected officials agree that the remaining money should be used to stop the national foreclosure crisis instead of a continuation of current policy where Wall Street firms receive continued assistance to pay bonuses to executives and dividends to shareholders as promoted by the Bush administration.

monopoly-moneyAs if the U.S. needs yet more government agencies, Geithner is considering creating a new bureau within Treasury to oversee the existing TARP funds. Adding oversight personnel to government measures has proved to be a failed premise, especially since any provision lags far behind the need. Any potential for work backs up due to lack of staffing, if staffing is ultimately provided over the long haul. Such provisions are more like a governmental agency employment and monetary ponzi scheme than professional organization. So far, overseeing TARP funds has been a disaster, largely made secret because of banking bailouts.

Meanwhile, banks in Britain are laying off staff while bringing malleable interns into the fold as underpaid and temporary junior staff, a move that could catch on in the United States: a cost-saving and control-oriented corporate move that has been all the rage outside of banking. British banks are counting on business picking up after the recession, rationalizing that young blood needs to be on tap for the occasion. Swiss-owned banks are notorious for this practice.

be an intern

be an intern

Corporate America has caused the economic crisis and now that they have been bailed out with taxpayer money, are seeking to continue to take advantage of people with the damage they have caused. Government seems to back up this thinking, which is ultimately destructive rather than constructive. Self-serving behavior continues unabated in government and corporate life. Now that truly is worldly wisdom at its’ worst. Anyone that chose to run personal finances in the same way wouldn’t last long, hence the benefits of corporate/governmental leveraging and power borrowed from the taxpayer.

Whether the American taxpayer can possibly benefit from all the confusion remains to be seen. ~ E. Manning

January 7, 2009

Federal Reserve Declares Deep Contraction

unemployment-ads2008 ended with an economic whimper mostly because of huge and underestimated American job losses, resulting in further economic collateral damage. Retirement savings that millions have poured their souls into have lost substantial value. At the December FOMC meeting, the Fed spent a considerable amount of time mourning and recounting the flailing job market and resulting economic damage.

What has really garnered attention is their revised picture regarding economic expectations for 2009. The economic gross national product is expected to fall much more sharply in the first half of 2009 than previously anticipated by the Fed. They expect a slow recovery of GDP over the remainder of the year depending on the political stimulus “from monetary and assumed fiscal policy actions.” That is “Greek” for government intervention.

“GDP was projected to decline for 2009 as a whole and to rise at a pace slightly above the rate of potential growth in 2010.” In economics, economic growth or economic growth theory often refers to growth of potential output or production at full employment, which is caused by growth in aggregate demand or observed output. Since all the relevant figures are skewed, the Fed’s statement is pretty much meaningless as far as content, but is designed to inspire hope in the psychological realm.

wealth destruction

wealth destruction

Americans are taking a beating where their personal wealth is concerned. Interbank lending and bank lending in general remains frozen, the system continues as broken, a creation of the unprecedented greed and misuse of the economic system during the Bush administration as they cheered on the economic boom as true prosperity. Instead, the boom years of the Bush administration has proved to be a manipulation of the system for corporate and personal goals by those in power without supervision and little regulation.

The problem of transparency continues to be the single major issue in all finances across the board. However, the process of making the financial process more transparent will put someone in more control, with the potential to not only to observe and manipulate, but profit directly from the any new process of transparency. Additional transparency creates power for the administrative body that deals with transparency issues, likely creating a fascist influence. The Federal Government isn’t likely to jump at the task of dealing with the prospect of increased transparency that is being heralded. Congress has proved that they don’t really deal with the reality of money.

The process and the profit from any additional transparency will likely fall to the Federal Reserve, a corporate body with their own profit and global agenda: a brotherhood of central bankers. They have received the power so far because of the lack of discipline and direction offered by U.S. government officials, whether executive or legislative. ~ E. Manning

November 16, 2008

Big U.S. Bailout Secrets, No Supervision

bailout game show giveaway

bailout game show giveaway

The Troubled Asset Relief Program, originally a $700 billion bailout program mandated by Congress was to be conducted with transparency and oversight. That hasn’t happened and none of the oversight posts have been filled. To make matters worse, the Federal Reserve is now showing $2 trillion in additional loans, which apparently have gone to the central bankers bottom line.

Disclosure has been a joke in a solution that was declared to be sound and manageable. Instead, there has been no accountability and a desire to change plans in the middle of the bailout game by Henry Paulson and his team. Most of Congress seems unconcerned.

House Rep Barney Frank gave the thumbs up revealing, “I talked to Geithner, and he was pretty sure that they’re OK.” Who is okay? Certainly the Federal Reserve is very okay as they have nothing to lose and everything to gain. Who is Barney Frank talking about? Revealing the collateral for the $2 trillion in loans would give away banking secrets, so nobody is talking.

The reality is that the Federal Reserve is taking bad debt from the banking industry and giving itself huge sums of cash, since it still holds all the loot. It’s profit taking time in New York City. Perhaps this is the money to pay for all those Ameros that the U.S. just sent to China to pay for their earthquake rebuilding project, but that’s only conspiracy talk. ~ E. Manning

November 12, 2008

Discouraged U.S. Treasury Takes Other Options

illiquidity support

illiquidity support

The major determination of the initial $700 billion bailout to buy up devalued securities has been scrapped. “Illiquidity in this sector is raising the cost” coupled with continued pressures on consumer credit. “This is creating a heavy burden on the American people and reducing the number of jobs in our economy.” Obviously, Paulson’s original take on the bailout was heavily overestimated.

What U.S. Treasury Secretary Henry Paulson has just admitted is that the functionality, transparency and the scope of the defective banking instruments is so poor, that buying them up won’t solve the problem or would involve a significantly larger sum of taxpayer money, showing a huge chasm in the underlying viability in the U.S. and global banking industry and perhaps the U.S. economy as well.

The bailout made only a month ago won’t deliver what was promised. Secretary Paulson pitched the bailout plan as a way to rid bank balance sheets of illiquid mortgage assets. Congress may show resistance to releasing the remaining $350 million in funds for future purposes. The real problem is that the national bailout won’t work at all. Banks are still holding the toxic debt that they created.

92308-paulson-bernanke-testifyThe United States seems to be stuck in a netherworld of economic dysfunction. Now the U.S. Treasury and Federal Reserve officials are exploring another facility with the idea of supporting the market for securities backed by assets. Paulson wants to use bailout money to encourage investing again. Investing in a terminally broken system is not the answer and a paramount oversight on Paulson’s part. His misjudgment is just another reason why Paulson should not be allowed to continue to tinker with the financial system. He doesn’t have the expertise required, further muddied by a failed and hopelessly bankrupt and antiquated system. This portends bad things for the U.S. economy and the world, but even worse, the U.S. Treasury is now misrepresenting previous actions without answering to any other authority under the guise of failure. Has anyone really studied the problem enough to be able to develop a core solution?

Continuing to invest in the same bankrupt insanity is poor thinking at best. Trying to convince investors to do the same thing is even worse. There is a push overseas to rebuild a new monetary architecture with a new global financial society. Will desperate American politicians pile on in an effort to redeem themselves and what is left of our failing financial system? What real options does America have?
~ E. Manning

November 3, 2008

Admission of Recession Before the Election?

consumer business crisis

consumer business crisis

Corporate results and outlooks have worsened. Automotive companies worldwide declared October figures were the weakest in 20 years. Economies have continued to weaken and as consumer credit and cash have dried up. Why wouldn’t they? Corporations, with the blessings of the U.S. Congress have sent a treasure trove of jobs overseas, milking the economy and American citizens for everything of real value for years while using the credit carrot to support spending. The federal government has added to the damage with heavy taxation and irresponsible governmental overspending. The mortgage crisis, compounded through a heavily compromised banking system has ensured an early downward trend in the national, if not global, economic cycle.

Before the election, no one wants to admit the evidence or the reality that the United States is in a recession. The European Union readily admits their recession. The U.S. government and its house of paid economists proudly hang onto false hope as if a recession is the end of the world.

Americans cannot deny the effects of the current economic crisis. Admitting a recession is likely to do little where the election is concerned, but there is always hope for the current administration. What most Americans do realize is that the economic crisis is a national security issue that was brought about by politicians in Congress and compounded by short-sightedness.

Trillions of dollars in bailouts have avoided a banking collapse. Congress is eagerly seeking to make things right by spending more taxpayer money than American taxpayers don’t have in the form of a fiscal stimulus package. Congress is remaining very independent before the election, scarcely mentioning the upcoming global summit in New York City. A public date for the summit hasn’t been set as the nation and much of the globe looks in the yawning chasm of a recession of unknown breadth and depth. The current administration is doubtful that anything real will come from the summit. ~ E. Manning

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