Busted: Bankers and The Global Economy

September 30, 2008

Financial Collapse: Fear & National Resentment

monetary whirlpool

monetary whirlpool

Global reports state that the global credit crisis has deepened. Banks have stopped lending to one another. Britain and Europe are encountering many of the same problems as the United States. Central bankers are dumping cash onto the market and playing the same game as the Federal Reserve through auctions to keep commercial banks on life support. Who is to blame? Today, the blame is being cast on the collapse of Lehman Brothers, but the reality is a tragic loss of confidence brought on by bankers themselves. Some of the best educated men and women on the planet have been powerless to improve the situation.

Commercial bankers have locked up the market and the only option central bankers think they have is to dump money into banks, in effect, satisfying the “need for cash.” The need for cash and credit is a symptom of the larger problem: panic by bankers because of their poor choices.

Economists publicly expect the longest recession in a quarter century with or without a bailout plan to rescue the battered banking industry. Most say the next six months are going to be very difficult. Market scare tactics say that if a bailout is not approved, a depression is likely as credit freezes up and markets collapse. The global consortium of central banks dumped an additional $630 billion into the global financial system, which will fuel both inflation and devalue currencies simultaneously. Central bankers are doing the same thing with other major currencies, portending a global debacle in an effort to keep the cash and credit flowing. On the other hand, the central bankers don’t want to be caught holding devalued cash, so now is the time to cleanse their palates. Central bankers only collect and horde gold among themselves since that is how they settle their accounts against each other.

stormy economic skies

stormy economic skies

Whether disaster can be averted or not, the United States has a right to do nothing, even to fail. The reality is that this is already what has happened as politicians and money managers stubbornly cling to the hope of sustaining what currently exists in the current power structure. The problem remains as a global crisis that even central bankers are ill-prepared to deal with.

George Bush warned Congress that they must act or damage to the U.S. economy will be painful and lasting. Congress seems to have rejected that notion. What the nation really has is a credibility crisis. Authorities seem to be more interested in their reputations than possible solutions. Meanwhile, many American scrimpers and savers are in a panic and most American voters resent the bailout efforts, convinced that the rescue effort is for the good of Wall Street and not the average man in America. Considering the decline in the U.S. living standard over the last few decades, the popular opinion to let banks fail and allow the system to unwind naturally is seen as likely to have little effect on meaningful personal assets in the eyes of most Americans. The real problem that panics bankers and politicians lies in the market correction and pricing standards in a bankrupt economy as values fall through the floor, creating still more bankruptcy and poverty for business and citizens.

The correction in the U.S. housing market bore a decline of more than 16 percent in July 2008 alone as the accounting totals have come rolling in. Americans are quickly becoming “upside-down” on mortgages on their homes, encouraging more defaults and foreclosures, even as more Americans lose their employment from an already failing economy.

The public line is that business must have a huge amounts of credit available. Business, like consumers have become increasingly dependent on credit while overpaying executives and paying stockholders instead of reinvesting in themselves. With credit becoming increasingly tight, businesses may find it tough to obtain short-term loans to meet payrolls or purchase inventory. That may lead to job layoffs, which could ripple through the economy in a matter of weeks. The bottom line is that solvent businesses do not need large amounts of credit for everyday business. In the “old days,” business used to borrow for expansion purposes only. Business needs were met by the influx of cash coming in from clients and customers. Have business standards declined so dramatically in the name of personal profit taking or is this statement simply a political red herring to generate urgency?

Increasingly, Americans have become more and more detached from the wealth and prosperity of Corporate and Political America. They have become beasts of burden for the affluent. Considering the circumstances, it isn’t hard to see why many Americans don’t favor a bailout, even if they risk losing a few thousand in a retirement account they may never see anyway. There is an underground pessimism and resentment that has come to rest in much of mainstream America. ~ E. Manning

August 19, 2008

All Quiet on the Western Front

Overall the news has been moderate with folks talking on and off about recovery sometime next year. Earlier in the day, the scuttlebutt was about recession concerns and corporate defaults, but later in the day, that worry had faded compared to inflation fears. Fear is what we have sold ourselves as the bankroll of greed and carelessness. Banks think that they have managed their resources well as they have cut back and are watching for corporate defaults as several prime economies continue to decline. Authorities are quiet, waiting for the next shoe to drop with inflationary and recessionary pressures.

The only man with a soul in the Federal Reserve, Richard Fisher, has been complaining about the refusal of the Federal Reserve to do anything meaningful about inflation. He proclaims food and oil prices have “overshot” on the upside, and that the Fed cannot afford to “gamble away” its credibility by failing to act against inflation. Strangely, based on what overseas influence says, the Fed has already done just that based on talk from as long as a few months ago. The Fed has no credibility. However, the Fed’s credibility is a symptom of banking abuse, by now a tired haggard topic. Raising interest rates is all the Fed can really suggest to combat inflation. Intelligent people know that Fed interest rates have little to do with inflation or recessionary recovery. Maintaining a viable economy is the key. Politicians have forgot that.

The Federal Reserve is in disagreement about what they can do to stem the tide of increasing and debilitating inflation. A few say that tightening the credit market is the answer. Inflation is double the Fed’s underestimated estimates and expectations. That reality isn’t much different than Europe. Inflation is a symptom of a lack of economic viability. The U.S. economy and global economy is rife with overprinted devalued greenbacks much like a cancer. Authority is focused on economic keys instead of allowing the individual to prosper.

Central bankers and economists really don’t know what to do about inflation, much less admit the real severity against global economies. The reality is that once a downward cycle begins, quietly waiting is the single best thing that can be done as the correction made by peoples and businesses in the economy adjust to the current economic reality. There is no disgrace in recovery for that is exactly what we want. A return to what brought the U.S. and the U.K. to the current recession is exactly what we don’t need. Bankers need to be bent over and heavily spanked for they are the ones that have precipitated the crisis we are dealing with aside from the fact that the country has lost its’ soul where independent job creation is concerned. The problem has become systemic because of the insistence on the U.S. government on crippling personal control.

The reality is that bankers have a huge advantage with the fractional reserve. The are able to loan out 90% of everything they have on the books over and over. In that regard, the banker’s ability to make money would seem almost limitless, but that isn’t enough for them. Instead, they have developed creative banking instruments like CDOs, designed to catapult profits into the stratosphere. Bankers abused the mortgage marketplace for predatory and creative profit, selling off loan securities to investors. That was unsustainable and dangerous. Instead of doing what bankers do best, the boring hum-drum of bean counting with interest and closely judging and rating those they loan to, they have involved themselves in gross speculation. Unfounded speculation is the debacle and outlook that the world has been hesitant to stop because of the temporary glory of profit. We have become a nation, even a world of shiftless gamblers with an aversion to hard work of any kind.

Everyone is worried because, as Standard and Poor’s says, “lots of damage has been done”. This economist says that if we are willing to learn from mistakes without repeating them, something real and meaningful has been accomplished. Those bankers that have involved themselves intentionally in criminal activities will be taken care by federal authorities, but most banking institutions will seek to buy off the authorities while passing off blame to certain internal authorities as scapegoats.

Since Congress closed for vacation, the U.S. has been in a waiting frame-of-mind with little to do. Everyone is in limbo waiting for a handout instead of getting to the business of life building. There is nobody to petition or to manipulate, the favorite pastime of America. All is quiet on the western front. The war against inflation and the economic roller coaster ride isn’t over yet. We are just now breaching the top of a rather large decline. Have we learned that life is not just an intellectual pursuit?

~ E. Manning

Create a free website or blog at WordPress.com.