Busted: Bankers and The Global Economy

April 3, 2011

The World’s Greatest Ponzi Scheme

Filed under: central bank, credit, economy, government, inflation, money, recession — Tags: , , , , , , , — digitaleconomy @ 9:11 pm

house of cardsIn the month of March, the U.S. government spent more than eight times its monthly tax receipts, including money spent for maturing U.S. treasuries.

The U.S. treasury cleared $128.18 billion in tax receipts during the month of March, but paid out a total of $1.05 trillion, which included $49.8 billion in Social Security benefits, $47.4 billion in Medicare benefits, $22.58 billion in Medicaid benefits and $37.9 billion in defense spending. The real financial beating springs from maturing U.S. treasuries where the U.S. paid out $705.3 billion.

In order for the U.S. government to stay afloat with only $128.18 billion in tax receipts, it had to spend $72.5 billion from the balance of cash on hand. This closed the month at $118.1 billion, including the sales of $18 billion worth of TARP assets. Most importantly, the U.S. treasury had to sell $786.5 billion in new treasury bonds, which it will be required to mature at a still higher in the future in order to keep the shirt of its’ back. Surely this is the greatest Ponzi scheme ever executed on the world as the government endlessly seeks to outrun the debt that it creates. The nation is able to fund government expenditures and pay off maturing debt instruments by issuing new and larger amounts of debt. Up to now the Federal Reserve interest has made this debacle survivable.

At this time the interest payments on the United States national debt is the government’s largest monthly expenditure. The world is waking up to the fact that the U.S. government is truly insolvent and that the benefits of propping up the U.S. dollar will no longer be worth the expense to foreign creditors. The U.S. government Ponzi scheme is being exposed for the world to see.

China is becoming more reluctant to continue buying U.S. treasuries as it positions the yuan to be the world’s new reserve currency. Japan needs to raise $300 billion to rebuild parts of their country that were destroyed by the earthquake, tsunami, and nuclear disaster. They will be unable to invest handily in the U.S. or may opt to invest outright in China as money is available. The U.S. desperately needs Japan and the Arab world to roll over national treasuries into larger amounts of new ones. With Arab revolutions taking place across major Saudi states and the U.S. occupying Libya for no good reason at all, the nation is likely see a global disdain for its previously valued treasures that it must sell to cope with the runaway spending and deficits of Congress.

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October 24, 2008

The Fear of EU Leaders

U.S. quietly key player

U.S. quietly key player

President Nicolas Sarkozy of France, the current placeholder of the rotating EU presidency, is spearheading the planned global summit in New York City. He expects concrete decisions to come out of the economic summit next month, which must address the underlying causes of the crisis rather reciting world crisis effects. “We have all understood that it will not be possible to simply meet and have a discussion. We need to turn it into a decision-making forum.”

Most of the world economies seem keenly interested in creating a new global solution to save the global economy and themselves from much economic pain. EU leaders and some other world leaders have voiced a certain amount of fear regarding the cooperation of the United States, who has remained very much on the back burner of the global summit considering its usual role. The election is undoubtedly playing a role in U.S. hesitation and resistance. 

Even Japan and China have become very interested in global economic solutions. Sarkozy told Chinese President Hu Jintao that he fears the United States, which is wary of excessive regulation, would be content if the summit produced “principles and generalities.” That is the real fear of EU leaders since they seem to be looking for radical global change and protection rather than placation and stop gap measures. ~ E. Manning

Global Financial Overhaul Recommended

October 1, 2008

Economic Bailout Drumbeat: Securities, Transparency & Housing Value

The White House, Treasury Secretary Henry Paulson, Congressional leaders coupled with candidates McCain and Obama, kept up a steady drumbeat of support for the ultimate bailout plan that has yet to materialize. For the moment, the U.S. political perception is that the world markets are stabilized. The reality is that on the surface, stability is a mirror on the pond of finance. Economists discuss among themselves that the reality of life in America remains that the nation is living way beyond its means. Political ideology in the States coupled with irresponsible spending has brought the nation to its knees. Generally, economists long for a pragmatic economic policy that is not driven solely by politics and special interests. An enlightened public is necessary to drive true reform to force politicians to do what they should.

Cutting bankers some slack by buying their bad securities is a bad idea. Is this not like overpricing the junk in your basement to resale as new? Garage sale junk rarely goes up in value. Depending on failed securities to magically increase in value when they are currently worthless is self-deception. Expecting financial junk to appreciate in value when there is no market for it because the premise of that junk is fatally flawed is no less deceptive. Failed banking securities are not wine.

The technical aspects of buying out bad securities is equally problematic. What is worse, depending on Congressional oversight to save the world is an exercise in futility. The lack of “transparency” is the chief issue behind the entire process. There is still no transparency in the process. Designing that transparency on many levels is probably mythical. Nobody within the brightest barrel of economists truly knows how to accomplish this transparency, but readily admit that the possible solution is highly technical.

The basis of the last several decades of wealth creation has been based on the foundation that housing prices could only increase. If U.S. economists had spent any time looking at Japan, most of us  would know the likelihood of truth. A few of us do. Since the crash of the 90s, housing prices in Japan have continued to move downward with no prospect of increase. Real estate is no longer the quality investment that it was in Japan and this nation is looking at the same scenario. ~ E. Manning

April 28, 2008

U.S. Mortgage Economic Analysis

It’s different in the United States. This time in history is different. The Federal Reserve won’t let deflation happen. Belief in the Federal Reserve and the avoidance of economic pain is nearly universal. The Fed is a legend in their time. The Federal Reserve won’t suffer. The U.S. economy and citizens will.

There are a handful of realistic economist-type people that see deflation coming. The sophisticates laugh aloud: “For almost thirty years people like you have predicted that our economy will collapse and it hasn’t happened.” (more…)

April 9, 2008

Fed: Global Economic Outlook

Filed under: banking, central bank, federal reserve, investment, money — Tags: , , , , , , , , , , — digitaleconomy @ 2:32 am

In the major advanced foreign economies, the growth rate of gross domestic product declined in the fourth quarter. The source of the slowdown has varied substantially across economies. In the Euro area and in the United Kingdom, output was restrained by a softening in domestic demand. In contrast, Canadian domestic demand continued to increase at a very strong pace, but because of an offsetting steep decline in net exports, real GDP rose only modestly. Japan was the exception among the advanced foreign economies to the pattern of slower growth; real GDP there strengthened in the fourth quarter with higher domestic spending and continued strength in exports.

Early first-quarter economic indicators for advanced foreign economies pointed to slowing growth. Growth slowed a bit in emerging markets, though it continued to advance at a fairly strong rate. In emerging Asia, the pace of real GDP growth picked up in the fourth quarter in China and South Korea, but it softened in most other countries. The rate of increase in economic activity slowed in Brazil, Mexico, and several other countries in Latin America in the fourth quarter, but remained generally strong.

The outlook for the United States is seen as negative and fragile. The Fed reported problems of declining asset values, credit losses, and strained financial market conditions could be quite persistent, restraining credit availability and economic activity, delaying and dampening economic recovery.

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