Busted: Bankers and The Global Economy

May 3, 2009

Inflation and Devaluation Looms on Horizon

warren_buffettMany of you haven’t been willing to believe me. Inflation despite the current troubled economy is still a very real concern. Why? Continually pumping dollars into the failed financial system is spreading the dollar very thin indeed. The bailout is likely to have “unintended consequences”. So says the blue boy of the financial market and Berkshire Hathaway chief Warren Buffett.

Buffett says that officials should be judged leniently since the economy was facing “as close to a total meltdown as you can imagine.” If you read this blog, you know what the meltdown was caused by: unchecked banking innovation and greed.

In the eyes of Buffet, the runaway debt spending must be paid for sooner or later (no force majeure?). Political leaders show little inclination to raise taxes, at least in an upfront way. Buffett indicates that one sure way to pay for excess spending is to “inflate the value” of the currency. The biggest losers in a surge of inflation, he added, would include holders of bonds and other fixed-income assets. “I haven’t had my taxes raised. My guess is the ultimate price will be paid by a shrinkage of the value of the dollar.” Duh. ~ E. Manning

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April 16, 2009

Economic Lies that the System Promotes

snake-oilYeah. Yeah. You’ve heard it all and everybody is trying to sell you something. The snake oil salesmen are all around. Washington is no different. The lie continues to spread that investing your money in banks or the latest government bonds are safe and sound investing. Think again.

The problem is that we have a ‘dumbing down’ of the American economic system as foreign investors pile on to invest their otherwise worthless American greenbacks and you are the one that will suffer through devaluation and hyperinflation because you base your life on money and monetary acquisition that central bankers run. Your economic livelihood and future is at stake if you have piles of money or owe piles of money. That applies to most Americans. Your investment is an illusion, the same as the thin air that central bankers and banks have created.

The fact remains that there is little monetary defense or value in trying to tell the average American that they can somehow defend their monetary wealth when the central bankers continue to erode that wealth into nothing in a hopelessly compromised financial system. Central bankers are riding the dark horse as they plow the dollar into non-existence so that they can rebuild a new monetary system from the ashes they have created. Naturally, this is to their advantage. The sad thing is that Washington politicians are hopelessly compliant and cooperative in an effort to create a new system from the ashes of your financial lives and years of servitude to their system. We are the fools and most Americans will undoubtedly foolishly listen the advice of the financial sages. What is Washington D.C. up to? CONTROL.  What are central bankers up to? CONTROL. Never forget that what you are being told by mainstream politicians and financial media is designed to secure the system over your life or means of livelihood at your expense.

Gold? Unless you hold the nuggets of goodness in your meaty little hand, don’t buy the snake oil. Gold investment certificates aren’t worth a thunder mug full of waste. Remember the old proverb that possession is nine-tenths of the law. In this case, physical possession is your safest bet, but far from perfect. Your stuff is only as secure as you are. The little guy can easily be pulled from his stuff during a crisis.

I am linking to this electroblurb because it is the right thing to do overall. I do not advocate the sales of the product or the conclusion reached. I ask you to read the facts and forget about buying anything that involves a significant portion of your money, devalued or otherwise, because the money you earn represents your life.

September 20, 2008

U.S. Economy: Stagflation in the Wings

The dark underbelly of arrogant and evil monetary policy been put into place today. The decision isn’t new, but is repeated constantly. This decision will affect you and everything you do from today. The news seems innocent and matter-of-fact on the surface and is reported by the media in that fashion, as if central bankers are doing all of us a favor. The reality is far from innocent or hum-drum. Central bankers are pumping billions of dollars in American greenbacks into monetary systems to “sustain the market.”

In response to financial turmoil and lack of confidence, central banks began injecting huge amounts of cash into the world financial system in an effort to make sure that firms needing monetary resources to stay afloat could actually find some. The British central bank, the U.S. Federal Reserve, the European Central Bank and the Swiss central bank: let call them the International Society of Bankers, have injected around $400 billion into the global financial system so far.

global credit

global credit

The idea behind all of this credit pumping is liquidity. This liquidity is for lending, borrowing and who knows what else. All the liquidity isn’t helping you or me directly most of the time. The liquidity is supporting the market to keep the market from tanking in a rather large way or at least to keep global business from stalling. According to central bankers, this is supposed to be good. What is the down side for all this global credit?

Remember that the stock and trade in finance today is the dollar. It is the toy that bankers use to get business done globally and the tool used to manipulate (both good and bad) global markets. As a result, the effect of the dollar on the global economy is likely to be very different from the effect on the U.S. national economy.

As an economist I could talk about M3, job statistics, the national debt or use any number of magical numbers and percentages. I could try to impress you with enormous intellect and knowledge while talking over your head. Sufficient is the fact that record numbers of jobs have gone by the wayside this year and even more jobs are being pumped out the U.S. economy by multinational corporations to promote their immediate bottom line. Sufficient is the fact that the mortgage meltdown is summarily destroying the banking, mortgage and finance system. The causes of the meltdown were designed to bolster and send the industry to new heights of profitability. Sufficient is the fact that the federal government has opted to cover, guaranteeing practically every business failure and misjudgment with credit that they don’t have from the central bankers themselves. That is reality.

A key reality is being ignored that has been previously discussed. U.S. politicians have put the gloss on the reality of our national recession by calling it a slowdown. U.S. politicians and most economists put the gloss on the reality of our national inflation rate by minimizing it with false figures and deceptive tactics. U.S. politicians and most economists don’t want to recognize what this nation has staring us in the face as a result of continual bloodletting of the dollar around the world.

That evil is stagflation. Ben Bernanke has tried to prove that we aren’t going through a 1970’s style economic situation, as if we should be looking at the 1970’s as some kind of measuring stick for today’s economic blight. He is missing the point that the building blocks of the economy are not only different, but that many of the pressures driving the forces behind the economy, now a global economy, is also very different. Comparing apples and oranges is useful only if you can agree that they are fruit, but the sameness ends there. Need I say more? The texture, flavor, nutritional value and uses are similar but different. The same is true today. The only truth that remains the same is the central bankers are behind the economy to profit themselves. All the measuring sticks have altered, corrupted or adjusted to a fine promotional edge. Economics has become something other than science: a marketing scheme. Central bankers are working their global magic and deception on a global basis without apology and most of the world is thanking them for it.

Stagflation is an economic situation in which inflation and economic stagnation occur simultaneously and remain unchecked for a period of time. This is a combination of policy by central bankers that allow excessive growth of the money supply and an economic shock such as a excessive regulation, huge job losses, declining wages and unchecked inflationary prices. We have all of these in place and in force right now.

Continually dumping more greenbacks on the global market may have short-term global and corporate benefits. The central bankers also benefit by increasing the debt base, charging more interest for various and sundry economies and swapping cash for gold held in their vaults as collateral. The short-term effect of acute dollar liquidity on the U.S. economy is very different on all terms.

As the fires of inflation are stoked and as the national economy continues its descent into the economic abyss, the mire of stagflation only worsens, creating a national and ultimately a global dilemma if left unchecked or unmitigated. All of this affects you in very real terms. You are living part of that dilemma today.

Continued government guarantees and nationalization of business across the board makes government larger and creates a larger drain on the American taxpayer as well. In essence, you are paying to sustain the global economy, while the central bankers collect the cream at the top. You are the human capital from which all profits are milked with little reward. The problem behind all of this in a declining economy is that a declining economy cannot fund all of the bells and whistles required by endless debt creation. Ultimately, the situtation is not sustainable.

The nation is running into a wall of debt that must be addressed through some new invention of government and finance in order to keep the scheme going. That is where the nation is at today as we pay collectively through the nose for the privilege of being part of the stock and trade of global finance. The central bankers and the U.S. government have already joined forces in a quasi-governmental scheme for economic power and control as the economy is slowly drained. The men and women that we have elected have brought this to bear. That is why this election is probably more important that any other. Make the right choice.

Stagflation may not be avoidable, but it isn’t too late to save what is left of the people in this nation. We are “human capital,” worth far more than banker grist. ~ E. Manning

Originally published 9/18/08 on TNTalk!

August 22, 2008

The National Deficit Time Bomb

national security time bomb

national security time bomb

Discussion of the U.S. national debt is reasonably prominent on this website and is core to what is often discussed. Recently, Warren Buffet, famed trader extraordinaire has taken some of the spotlight to warn about the excesses and pitfalls of the U.S. national debt that continues to build unabated.

If the U.S. doesn’t move quickly to tame the federal government’s debts, the idea is that the nation will enslave coming generations with economic problems that make this bad year in economic finance look very rosy indeed. Warren Buffet and Pete Peterson are fielding the idea that the national deficit matters this election year. It does, but do the politicians and the nation of people realize it?

Tops in the discussion and recent advertising for the documentary movie “I.O.U.S.A.” is the idea that the United States will continue to be enslaved for future generations to debt that we are creating now. Buffet, Peterson and many others are considering not only the huge $10 trillion dollar national debt, but the projected needs for a soon bankrupt Medicare and Social Security system that threaten to swallow up the system that Congress built. When the additional debt is considered, the U.S. is looking at a national deficit of more than $50 trillion. Keep in mind that this is the future and whether these brilliant money mongers say so or not, is not indefinitely sustainable.

This writer, from all my vast experience in corporate finance and economics, says that the United States doesn’t have the time to indulge in fantasy-land thinking. The future of the nation as the United States is actually at stake now and the crossroads of no return is somewhere in the immediate future. A nation of people cannot continually spend more than they make and put off paying for today tomorrow, while sending huge quantities of economic resources overseas. The International Society of Bankers, at some point and time are going to cut off the “worthless, self-destructive” attitudes that Americans insist on bathing their collective lives in, politicians included. This nation is quickly running out of the clout and the economic strength that it needs to continue to garner the interest and affection of global bankers, the holders of all the credit based on the money system that has been developed. The United States is bleeding itself to death as politicians and business continue the carnage for their own empowerment.

“Our situation is a lot worse than advertised, and we need to start making some tough choices if we want our future to be better than our past,” announced former U.S. Comptroller David Walker. Mr. Walker, the bottom line is that the nation doesn’t have a future if politicians and business interests don’t take notice of the impending crisis. They are too busy dealing with their own self-absorbed ideas and plans for profit. In essence, the people that you are listening to in the documentary “I.O.U.S.A.” are the very ones that had a role in bringing this financial crisis about.

Naturally, the knowledgeable know that the national debt has mushroomed like a nuclear cloud since George Bush took office, which has been in the last eight years. Before that, we screamed about the national debt without realizing what would be cast upon us by reckless politicians in the new millennium. Republican “cost-cutting” and “low taxation” are a myth because politicians have become something other than what they represent themselves to be. The definition of party politics has become a definition bordering on meaninglessness for most of the lawmakers that America continues to appoint. Politicians have denuded the U.S. economic and financial landscape for the appearance of power and the personal interests for the short term with the idea that the United States of America is a “forever deal”.

Walker and the movie cite government figures that show the U.S. government owed roughly $53 trillion more than it had at the end of the 2007 fiscal year. According to the documentary promoters $11 trillion of that debt covers the publicly traded government debt, the amount the federal government owes to employee pensions and the cost of environmental cleanup of federal land. The rest of the $53 trillion figure accounts for projected shortfalls in Medicare and Social Security.

Dealing with such luxuries as land cleanup and the future of health care and retirement won’t matter if the nation spends itself into oblivion and poverty. Even pensions, government guarantees and publicly traded debt won’t matter if politicians don’t get a grasp on some of the realities of what they are doing. The finances of the federal government of the United States threaten the nation more than any subprime mortgage crisis. The mortgage and housing crisis is merely a prelude to an economic house of cards.

Dollar devaluation is in the now and in the future in a very real way as the Federal Reserve continues to serve its’ ailing and senile patient, the U.S. economy. The Federal Reserve is one of many leeches that hang on the national economy, draining it of its lifeblood and purpose. This election year may rank as among the most important in this country, but for all the “wrong” reasons and the people of the country don’t fully realize it. Perhaps the movie “I.O.U.S.A.” can have a profound effect if enough citizens take interest and are willing to demand accountability and change. It won’t be easy. Whether the nation will survive depends on the resolve of the people and their determination to force the current attitudinal corruption out of politics. The problem remains that most Americans live in a very self-absorbed world of their own making, refusing to deal with anything other than what immediately affects them. That is the national Achilles heel. This is a national security issue larger than any war could ever be.

Powers come and go. Like Rome that preceded us and every power before and since, nations rise and fall. Our failures are due to our own corruption and selfishness.

~ E. Manning

August 21, 2008

Wages in America: Faking Lifestyle

web of deception

wages: web of deception

The concept of wage stagnation is in the news once again even though the economic blight is a mere 35 to 40 years old. The media and economic bean counters are curiously worried about the “standard of living bubble.” Imagine the idea that this news at all. Most Americans, except during times of heady expansion in certain markets, have been fully aware of the concept as jobs head out of the American economy in droves because of corporate multinationals and careless politics. For years, the idea was that you could beat wage stagnation with a well-heeled education, but reality has proved that this idea is no longer true if it ever really was.

Americans and other high-faluting nations have been loading up on credit for years to bolster the appearance of bettering the Joneses next door. The contracting market cut into that fantasy for many credit afficianados. Now the contracting job market, which in reality has been imploding in the United States for some time is hampering the ability of Americans to cope with lifestyle choices.

If that prospect wasn’t enough, now Americans risk losing the ability to use their precious credit cards because contracting credit markets threaten to limit access of credit cards to many participants. The entire economy of the United States seems to be facing a reality check where fiscal relevance is concerned.

credit is good for America

credit is good for America

The media has suddenly cooked up the idea that inflation has been increasing more rapidly than pay increases, which goes against what the U.S. government has preached for decades. A modest 3 percent raise in pay was supposed to cover the national inflation rate. The reality from the 80’s to 2006 shows a ten percent yearly-averaged inflation rate. Using these humble and easily accessible figures, no fool would admit that wages have kept pace, even if those wages were not stagnant. The term stagnant is relative, depending on how you want to justify the term.

The cold reality that we all know is that we have supported our lifestyle dreams on credit. We lost the incentive to save, which we have lost anyway due to the monster of inflation. Saving a few dollars now with a regular inflation loss means a dollar saved is a dollar lost, just a little slower over time. The endless printing of American greenbacks combined with a burgeoning national debt has ensured that a dollar saved ten years ago is worth zero today. Any interest gained on that dollar is worth very little unless you were able to invest that dollar to somehow create more. When viewed in reality, inflation is really a hungry bear. The working man has been royally and cruelly worked over, even though the government has denied the reality all along.

semantics in wealth perception

semantics in wealth perception

Since the mortgage debacle and the contracting real estate market has hit the economy (not pointing fingers today), Americans have embraced the last source of easy money to keep up their lifestyle or to avoid the reality of bankruptcy from relentless spending.

Americans aren’t ones to be told no when it comes to lifestyle. According to bean counters, credit card debt is growing much faster than the economy as Americans use credit cards with interest rates as high as 30% as a substitute for income. Last year, use of credit card increased around 7% each quarter. That is a 28% increase in an attempt to sustain economic lifestyle. Last May reported an increase of credit card use of 7%. If that were to continue for 12 months, the humble increase is a mere 84%. Obviously, this economic miracle is not sustainable.

A big crush is coming, but not just because you can’t pay your credit card bill. Banks are “securitizing” everything including your beautiful credit card debt to be sold off to eager desperate investors, at least bankers hope. Citigroup alone lost $176 million through securitized bonds for credit cards in the last quarter. Sweet. Delinquency rates devalue the securitized bonds, forcing a writedown in value.

Since banks can’t sell of all that glorious credit card debt, banks are going to make customers pay more for the privilege of easy money resulting in less easy money and a contracting credit market over time because creative money creation is not working to the advantage of wiley bankers.

Where America will turn next is anyone’s guess. Barring black market prices for selling off children as collateral, Americans may be faced with the joys of living within their means. The good news behind all of this drama is not the perceived pain. Contraction of any marketplace is a mixed blessing. Billions will be lost and millions of Americans will see hard times, but in the end everyone is a winner because, at least in theory, the marketplace achieves a value balance. America has needed a long-awaited correction that politicians are deathly afraid of. Market contraction means that prices and everything that is assigned a dollar value decreases in relative cost. The exception to that blessing is the specter of devaluation or the possibility of hyperinflation due to stagflation. That however, is another story. ~ E. Manning

July 31, 2008

Creation of Wheelbarrow Money

Wheelbarrow money isn’t just a figment of the past or in the annals of German history. It is real and today, just not in the United States. On the other hand, the little nation of Zimbabwe is reorganizing its money in an attempt to meet its outrageous 2,200,000% inflation rate. Obviously, the crazy percentage relates to older and better times.

Last week Zimbabwe released $100 billion notes in a meager attempt to fight the inflationary wheelbarrow syndrome. The day the new banknote hit the streets wasn’t enough to buy a loaf of bread. Today, the new bank note won’t cover that. Inflation has already eroded the value. Now a loaf of bread is $200 billion and if a Zimbabwe citizens longs for a can of Coke, that is a mere $600 billion. Zimbabwe is cutting ten zeros from its currency making $10 billion a revalued one dollar. In headier times, Zimbabwe was the toast of the third-world town.

The problem isn’t over. Inflation is so rampant, monetary units are expected to change again in the near future. Interestingly, just six months ago, this writer heard comparisons of Zimbabwe’s central banking policy to Ben Bernanke’s Federal Reserve of U.S. origin. Naturally, there are plenty of differences, notably that Zimbabwe is certainly not America. The overspending habits, however, are very much alike.

What the pundits say, there are similarities and the fact remains that no single economy is immune from inflation, especially when money policy and overspending is largely ignored. Could it be possible that a wheelbarrow of dollars could be required to buy a loaf of bread? It happened in Germany and if we keep ignoring common sense, nothing is impossible. Taking wealth for granted through fraudulent spending is a dangerous policy.

Debt, like the U.S. national debt, doesn’t go away, unless of course, the United Nations collects donations from larger economies to make that happen. Strangely, while this plan is part of U.N. policy creativity and wishful thinking, the reality is another thing altogether. Whether wealth redistribution plans of the U.N. actually work in 2015 or in 2030, U.N. plans aren’t really about building local economies, but about global empowerment. It isn’t happening for Zimbabwe and the outlook isn’t good for the U.S. either where runaway spending is concerned. Bailing out the world and supporting global governance is part of the reason why the United States national debt is where it is today.

Remember that the current nation of Zimbabwe isn’t promised tomorrow. The United States shouldn’t take the future for granted either. ~ E. Manning

July 27, 2008

Expanding Inflation Risks U.S. Economy

The debate has been on since the United States has seen an alarming increase in the costs of essentials across the board. For years, the Federal Reserve has ignored the impact of energy and food prices in its computations for inflation. As a result of recent events, the Fed has been forced to retool its thinking, even though the Fed body of thought insists on using the same computations.

The Fed remains skeptical that high commodity prices will ripple through the economy, leading to broad price hikes and big wage increases. Why the Fed assumes that wage increases are even in the cards is beyond most economist thinking. The fact is that the United States is in the midst or very close to what the Federal Reserve and economists hate the most: the evil of stagflation. There won’t be appreciable increases in income, only hikes in cost, loss of jobs and the devaluation of the monetary system.

The myth is that the Federal Reserve can control (more…)

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