Busted: Bankers and The Global Economy

July 11, 2010

Recession: The Ol’ Double Dip?

What is happening in the U.S. economy? The  newborn atmosphere of a slow recovery has plummeted since the start of the year when financial agencies were debating when to announce an interest rate increase. That is no longer the case.

The tax credit for first-time home buyers for up to $8,000 was over in April. Since then, housing transactions have nearly vanished. The mortgage loan interest rate has fallen to historic lows. The economic upturn that authorities claimed earlier this year simply the result of economic stimulus measures by the United States government.

Events are just as somber outside of the United States. From all appearances, a $1 trillion relief package ended the financial crisis that hit Europe. Still there is not a sign of recovery. Germany provided the needed stimulus funds, but is no longer providing capital to keep failed economies that have squandered credit with bankers solvent. Efforts to revive the economy have resulted only in more loss as bankers continue to plunder with their derivative cons. The U.S. has been fearful of making changes for the banking and finance community. Central bankers are still in charge, printing dollars as if there were no tomorrow.

Job are gone in the United States, likely forever. This is the admission of VP Joe Biden a little more than a week ago. States are looking at emergency measures to see what they can do to avoid the bleeding of jobs to other lands and to other peoples. Arizona is due to begin enforcement of a controversial immigration policy that is designed to return employment back to Arizona residents since measures by the federal government have been lackluster to non-existent in many places. The nation is full of illegals, the exact number unknown.

The price of a global economy is likely to be high. Every economy is subject to bring another one down. No one has discovered a way to move out of the doldrums. $787 billion in the U.S. was designed to boost domestic consumption, but the market is still cold. Congress has moved to bolster the economy through The Buy American Act, a ancient law passed in 1933 that requires the suppliers of the government to use American made products. Lawmakers are afraid to close tax loopholes that have remained open for corporations since 1991. As a result, nothing changes.

This has cooled temporary benefits of trade by corporations in the U.S.  known as the trade deficit. Corporations don’t care about this public denuding of wealth. They simply look to their own profits, not a sustainable relationship over time. Politicians outside of the U.S. want to promote free trade, as if the United States has more to offer in this regard. Even during the recession, the States were the primary agent of consumption for the world. Reckless spending, careless law and the rise of the corporate oligarchy has resulted in a new world, with a more level playing field. That is, after all, what globalists have wanted. This means that the big players that the globe depended on for economic sustenance are no longer the powerhouses they once were.

The nation is in an economic quagmire because it has ceded its wealth to corporations, a.k.a. multinationals and central bankers. The common opinion is that nations should not try to survive at the expense of other nations. Even so, the reality is that this has always been the case. The homogenized sameness of global balance supports only those that are in place to take advantage of it. The majority of the world will suffer at the hand those few that won’t. What’s new about that? It’s simply more political pandering that benefits a few.

Advertisements

August 18, 2008

Will Global Confidence Cause a Chain Reaction?

Just a few weeks ago, U.S. Treasury Secretary Henry Paulson held that a bailout of Fannie Mae and Freddie Mac to be highly improbable, if not impossible. Now there is talk that an extraordinary Treasury capital infusion may be needed to restore faltering foreign demand for debt issued by Fannie Mae and Freddie Mac. The mortgage twins are the nation’s two top home funding sources that the government is willing to rescue to save the U.S. housing market.

Foreign central banks have dumped nearly $11 billion from the holdings of the “mortgage twins” in the last four weeks. They don’t plan to reinvest in force until the U.S. government is clear when it will back Fannie Mae and Freddie Mac.

Investors and foreign central banks may be concerned, but the reality of a bailout is academic. The entire fabric of the U.S. housing industry depends on the continued functioning of the mortgage twins. Unless foreign bankers and the Fed expect to pull out on their support of the U.S. economy, such paranoia is largely unwarranted. Obviously, the real concern for central banks is the value of the securities that the foreign bankers hold. Devalued securities diminish their investments; hence, their power. Monetary value has really come to be all about appearance and confidence. Central bankers won’t be caught holding any empty sacks in the name of tacit support. They are part of a chain reaction.

Mortgage bonds are trading poorly while investors wait for good news on Fannie and Freddie capital. Meanwhile, U.S. mortgage rates have climbed to their highest levels in a year in reaction to the contracting housing market. Both are part of a chain reaction.

Investors are momentarily in a mood of increasing nervousness about the global economy, with deteriorating growth in the United States, Europe and Japan now beginning to bite into “emerging markets.” There is a growing belief among investors that the world economy in general is at risk, and with it the emerging markets that have been a powerhouse of growth and investment gain over the past few years. The emerging markets cannot and do not stand on their own. At this stage of development, they are step-children of larger marketplace that isn’t all that sound to begin with. Investors are always ready to be nervous, especially in a time of volatility. They can be and usually are part a wild card in the chain reaction.

Oil commodities, which were up and making the world nervous are now down, making the world nervous. It would seem that the world is simply nervous and using oil as an excuse. Previously, oil was a great profit hedge. When the U.S. started openly discussing releasing a large portion of the Strategic Petroleum Reserve on the open market, investors backed off from the heady world of oil commodities. Naturally, they are taking it slow. Nobody wants to rock the boat too hard. This is part of the chain reaction.

Inflation is up, which has been blamed on Big Oil or at least on commodity futures through investment banks. Which came first, the chicken or the egg? While this topic is open for debate, global inflation is up after inflationary pressures shot up in the U.S. and the Middle East from overheated greenbacks. That doesn’t look to get better anytime soon, especially as long as the U.S. keeps stealing money from the taxpayers vis a vis the Federal Reserve. This is part of the chain reaction.

Global banker’s incessant worrying over their central bank interest rate is nonsense. Rates are so low as to have little effect in the real world. Commercial bankers are profiteering from borrowed central banking money as well as keeping their leaky banks afloat during this rough period. This is part of the chain reaction.

The single bright sector in banking remains in Islamic banking with a very different set of rules that bankers have yet to learn to exploit to full potential. In their worry, investors will look at this new hot market in hopes of developing new means of prosperity, which will likely mean a rise in power in Muslim nations. That is enough to worry many political persuasions worldwide as politics feeds into the monetary system. That is part of the chain reaction.

As economists, politicians, bankers, analysts and writers, we are always looking for an excuse, rationalization or explanation to meet a mindset. While most economists would tell you otherwise, it is not science, but rather a facet of human behavior. As such, economics enjoys the same ups and downs as human life does. That is part of the chain reaction.

June 24, 2008

Fed Interest Rate Responsible for Inflation?

The joke of the day is CNN money’s recent article ruminating about the effect of the Federal Reserve’s low-interest rates and the creation of inflation. Low-interest rates for bank have helped the bottom lines of financial institutions. Consumers and investors have experienced little, if any, benefit.

According to the article, some think that low interest rates are at least partly responsible for some of the serious drags on the U.S. economy today, such as soaring prices of food and gas and the weak dollar. The interest rate of the Fed have nothing to do with such things at this low level of interest!

The country is fighting on two war fronts in Iraq and Afghanistan. Credit and monetary funding has been issued by the Federal Reserve on record levels. The national debt has grown exponentially since President Bush took office, which is probably his greatest legacy. The constant creation of monetary credit has thoroughly devalued the dollar in relation to the rest of the world. As a result, costs are higher. Capital value in the real estate market and economic pressure on the cost of goods continues to drive values down. This results in a contraction of the marketplace.

Wall Street and the media need to grow up. Sour grapes during tough times among people with most of the power and influence is ridiculous. Wall Street continues to find ways to make money. Scapegoating for their own benefit is exactly the situation. If you have read the information on this website, you know why the economy is in the dumper: financial and banking greed.

Most economists think inflation is here to stay. It’s likely to get worse.

June 9, 2008

Banks Take Profit on Interest

The Federal Reserve has aggressively cut interest rates. The economy is largely stagnant and jobs are disappearing into the mist. On the mortgage front, large quantities of homes remain unsold. Under normal circumstances, one would assume that mortgage rates would already be on floor to attract qualified home buyers. That is simply not the case.

One reason is that many large mortgage brokers went out of business. They could no longer find investors to buy their loans and fund business operations. The number of mortgage lenders is much smaller than it has been in recent years, compounded by the fact that billions of dollars in liquidity have vanished into thin air.

Foreclosures and delinquencies are held to be quite high in the financial market and lenders are frightened by the prospect. The general belief is that inflation is the demon that the U.S. economy faces, which will cause the Fed to raise interest rates. The real problem that this economy has is deflation of the national currency, the dollar. The Federal Reserve has issued so much credit and printed so many dollars that the global market is awash with them.

A dollar doesn’t go as far as it did a year ago and the lack of buying power shows across the board in higher fuel costs, food expenses and falling capital investment prices. Instead of learning new investment techniques, investors are going overseas to invest. Even investment bankers are opening up a new stock exchange in Europe, since the euro is solid right now. The opportunity for money making overseas borders on legendary.

U.S. banks have been in such a bad way that they are not passing on any savings to customers in an effort to hold the bottom line. As a result, favorable rates from the Fed or lower costs are being absorbed by the banks and not passed on with lower consumer costs. In fact, the specter of substantial inflation is more real than is recognized, which in reality is holding up bank lending rates. However, this ‘possibility’ is readily ignored. The U.S. government and the Federal Reserve still maintain to the public that the U.S. inflation rate is holding steady at 3%. The media goes along with the charade even though the evidence is clear. The appearance is that the nation’s economists have forgotten what inflation really is or how it is measured. That is how America keeps its national confidence: through lies and deceit.

Blog at WordPress.com.