Busted: Bankers and The Global Economy

February 9, 2009

Mortgage Bailout on the Way?

obama-mortgage-fingerprintsRemember the mock outrage of so many politicians last year as the U.S. economic national debt ceiling approached $10 trillion? Last October, when we heard about a $700 billion bailout of the financial system, it seemed like all the money in the world as a manner of speaking. Never mind the debt ceiling since President Obama doesn’t recognize national debt as an issue. Since then, the collective “we” in this country have managed to spend another $10 trillion without accomplishing a thing beyond buying preferred shares in certain banks. The year isn’t over yet (it’s only February 9th) and more economic stimulus is probably on the plate as job losses continue.

How has the nation lost its’ way? A lack of common agreement regarding simple principles and a common vision for the future that makes sense reveals the true crisis. Deceptive flawed thinking among lawmakers portends a real problem for the future as far as the common American is concerned.  Disagreement and strife is the real standard that lawmakers hold to. There has been no presidential honeymoon that this writer can see. We have forgotten what stewardship really is. Hope isn’t on the plate where elected lawmakers are concerned. A divided house cannot stand indefinitely. Perhaps President Obama needs to campaign to the American people to grip some sort of vision….but I digress from this mental exercise.

Another couple of trillion dollars would pay off every residential mortgage in the country and Americans would be home free…literally. What foreclosure crisis? Every American with a home would have a piece of America to call their own without a bank involved. Think of the quick national stimulus  the nation would enjoy as everyone spent their house payment on disposable income and new vehicles, the current blight of lack in the current economy.

The fact remains that the national foreclosure crisis is always on the back burner, yet is blamed as the basis for the nation’s economic demise. Naturally, lawmakers can’t support any kind of quick national housing stimulus that I sarcastically penned because of the $40 trillion plus in potential interest  income that scandalous bankers would never receive because of early prepayment before the term. Any bailout like that won’t happen because it takes power away from the system. Taking money away from bankers would be far too simple while firing and imprisoning financial thieves is too difficult and embarrassing.  Real economic stimulus is far too simple when it comes down to rewarding honest income producing activities. Instead, politics simply gives bankers more money as if that will really solve the problem as they complain about esoteric banking derivatives that nobody knows how to fix. Let Timothy Geithner have a go at this bailout.  Based on what has been discussed, the nation is still looking at investment shell games that are no better than what bolstered the economic crisis to begin with on Wall Street. That is the financial literacy that the Federal Reserve and Wall Street know. ‘Democrats’ deserve a chance to repair the system and they will have that chance.

Can you imagine a retired economist presenting such ideas and speaking in such a way? Remember, it is always about money and authority, but then it always comes back to money and the status quo. That’s all about authority too. ~ E. Manning

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!

September 19, 2008

Total Meltdown or Financial Reconstruction?

What is happening on Wall Street? Everyone wants to know why government has waited so long and who will be held accountable. Now we are in the midst of a financial panic. Communication at the top of government during the panic has been in contention among politicians. Some are pointing fingers of blame. Most are simply carrying a stiff upper lip and wearing a poker face.

hundreds of billions of dollars

bailout: hundreds of billions of dollars

There has been plenty of talk about effectively sucking up the bad securities with a vaccuum cleaner style policy that has yet to be revealed. This miraculous policy is what authorities will be working on today and this weekend in order to avoid what some say is an inevitable collapse. In essence, everything needs shoring up and the government seems intent on taking care of the world. Open the newspaper or check out the internet to see the flurry of activity by authorities “to address the underlying problem.” All of this is being touted to cost the American taxpayer far less than allowing the crushed system to play itself out. If you like big government or have the idea that only marketing matters, this may be the ultimate solution for you.

Recently bailed out Fannie Mae and Freddie Mac will be used to bolster the system, but all measures in place are deemed as “not enough.” Liquidity must be restored. Government is working to eliminate selling short by profiteers, which has worked to undermine the solidity of the system. They expect to buy out all of the securities, modernize the system to today’s standards and then set up new rules so that what led to the collapse can never happen again. U.S. Treasury Secretary Henry Paulson has revealed right now that saving the system from total collapse is what is on the financial and political plate this weekend rather than worrying about the idea of regulating the new policies that they want to put in place. Obviously, flooding the monetary system with a cash infusion yesterday has done nothing to take care of the crisis. That is no surprise.

Now a lame duck president is setting the direction for this nation with very little consultation, much like what he has done with other issues during his terms in office. There must be no controversy and authorities are in a great rush to action. Is that action warranted? Will the nation default on its debt? What will happen after the policy miracle of this weekend? Like it or not, prepare for a roller coaster ride. ~ E. Manning

September 7, 2008

Freddie & Fannie: The American Dream

For years, Freddie Mac and Fannie Mae have bragged that they are in the “American Dream Business.” If that is the case, the American Dream has just gone bust. In many respects, it is the beginning of the end although the U.S. Treasury wants to paint the idea of a new beginning.

The process ends a 70-year experiment that began as an attempt to get a struggling nation back on its feet after World War II, ending in arguably the largest nationalization in global history. Fannie Mae and Freddie Mac have been forever tainted by the mortgage meltdown and securitized loans.

Essentially, the mortgage twins are a colossal fraud full of failed policy decisions and misplaced trust. Banks loan the “creditworthy” money for mortgages. Fannie and Fannie bought the loans as-is and packaged them into bundles to create bonds that external investors could purchase. All the while, the government and taxpayers are on the hook for the entire spectacle as the entire scheme for profits unraveled with the introduction of the mortgage meltdown.

For decades, the perception of these bonds has been the same as the safety of the U.S. government bonds. The mortgage twins were established with the complete backing of the federal government. What could be safer? Whether such a guarantee ever actually existed is the subject of much financial debate now. The “government-sponsored enterprises”, now failed is the result of twelve months of slow painful devaluation in the mortgage market combined with the idea of government guarantees that couldn’t solve the problem of worthless securitized bonds and suffering confidence.

mad lady liberty

mad lady liberty

The disingeniunity of the government and the mortgage twins was so large and the undercapitalization so pronounced, that investors bailed out in large quantities. That reality is also a reflection of the deceptive state of mind of the U.S. federal government. The federal government is no longer based in any kind of true reality where policy or money is concerned. They have lost their way and their collective minds, hopelessly addicted to wishful thinking and the addiction to monetary power without the ability to back it.

The Feds were limited as to how much they could borrow to cover the mortgage twins. Now that Fannie and Freddie are nationalized, the federal government vainly hopes that full confidence will be restored so that investors can be coaxed back into the fold of business. The burden on the U.S. taxpayer is huge and the moral hazard brought about by carelessness is no smaller.

How can anyone trust an agency or body of people so corrupt or hopelessly addicted to wishful thinking. Politicians and bureaucrats are addicted to notions that have permanently altered and depressed the perception of the American Dream of owning a home.

will lawmakers wake up?

will lawmakers wake up?

Barack Obama mentioned that the bailout must somehow protect taxpayers. Republicans have made no such statement to date. Still, the truth is that taxpayer protection as a result of government oversight and abuse of regulation shows the moral and financial bankruptcy of the federal government is the worst way. They are incapable of any measure of trust or faith.

To make matter worse for Republicans, they have touted smaller government and lower taxes while promoting and acting out the opposite. The takeover of the mortgage twins implies that anything the current government order says is implicitely flawed, a mere placation of the public. John McCain and Sarah Palin are tied into that reality directly by the Bush Administration and Republican policy.

The Congress is not free from blame either and Democrats are guilty by implication as well. The struggle for power and the adoption of ideas that clearly don’t work are rarely corrected. Instead, the steamroller of Congressional law makes constant adjustments in failed policies that will somehow become miraculously repaired if lawmakers just care enough and spend more money that the nation doesn’t have from international bankers and foreign sovereign nations.

The bottom line is that American taxpayers have been greatly wounded and no placation offered by the current administration or long-term politicians have the respect of true patriots. We see the lies, the seduction and the abandonment. Government and lady liberty has become hopelessly addicted to vain thinking where money and endless promises are concerned. The nation is a laughingstock of pathetic liars, made worse by bumbling incompetence and mismanagement. The American people are muddied by corruption and slavery through ineffective and misguided leadership. ~ E. Manning

August 29, 2008

GDP Up: Why the Panic?

Bernanke and a much needed visit.

Bernanke and a much needed visit...

The economy performed far better than expected in the Spring (second quarter), reportedly led by exports and increased government spending, notably the stimulus program. Still, many economists like Wachovia’s Mark Vitner are talking up recession. Figures are continually revised up and down as more information comes in. “To many, it still feels like a recession.” Indeed it does!

Because of the weak dollar, nations have been buying more U.S. goods resulting in a foreign trade bonanza for the U.S. despite economic weakness on the home front. Consumer spending was up as well, reportedly sponsored by the $91 billion federal government fiscal stimulus program. Uncle Sam is still sitting on the remaining third of money allocated for the stimulus. What Congress will do with the surplus is anyone’s guess. That stimulus is now part of the burgeoning national debt that is approaching $10 trillion. The presidential candidates report that they are unconcerned with national debt as they propose new fiscal budget-busters.

unemployed.

unemployed.

The reality is still pessimistic as everyone realizes that all isn’t well. In fact, if you read enough news, you might get confused over the sundry viewpoints expressed. Still, nothing has changed except that when quarterly figures are updated, sometimes the nation comes out ahead in the statistics department. In the meantime, a weak dollar will help multinationals to consume more U.S. products or purchase from more U.S. suppliers. The world of business simply isn’t sharing that monetary goodness with their employees as they prepare for the reportedly bleak future ahead, continuing to fulfill the prophecy of recession. The labor market is still in decline, perpetuated in part by the continued offshoring of U.S. jobs to foreign markets. ~ E. Manning

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 5, 2008

Federal Reserve Betting on Banking Mojo

shell game banking

shell game banking

Kevin Warsh laid out much of the bad economic news as a result of the banking, finance and mortgage failure of the last year at the U.S. Department of the Treasury Press Conference. The Fed Governor spoke to Henry Paulson and bank supers, as poetic as a banker could be where innovation was concerned. It was what could be described as a banking innovation pep talk, an effort to drive inspiration for the latest money making banking creations while establishing a new securitized banking pool concept.

“the path to a new financial market architecture, however uneven and improvised, will not only be marked by the forces of retrenchment. The path should equally…be distinguished by the creative impulses that drive product and market innovation. It is perhaps too convenient to denigrate the attributes of …ingenuity…when the forces of innovation can disappoint and weaken the real economy. Policymakers and market participants alike should recognize that innovation–in our product markets, labor markets, and yes, our financial markets–is likely to prove a necessary net contributor to economic growth in the coming period. We should also be reminded that financial innovation need not be equated with product complexity.”

Creative impulses…market innovation…ingenuity…not…product complexity. Bankers just went through a peak period of massive banking innovation and have paid dearly…or rather some have paid dearly. On balance, the world has paid dearly with the exception of central bankers. Since the credit money isn’t real in their eyes anyway, nobody was really hurt. The insanity failed, apparently only because bankers weren’t financially literate enough. Warsh is ready to try a new kind of insanity again, fully recommending it as he pats his banker buds on the back and fully expecting a different result…or does the current Federal Reserve really care about the long-term results aside from their own corporate profits?

Warsh is suggesting research and testing for new banking innovation that can be exported to other economies to (gosh) profit bankers for rebuilding banking. This is a public admission that the morally bankrupt aren’t even hesitant to admit. They just cover it with big words and long sentences while the public ignore their public plans for profit at the expense of whole economies. But this time, the current crack Fed team is involved from the beginning and they are going to get it right.

The reality is that the Fed wants more of the same mortgage and bond medicine. They want a guaranteed bond framework to attract investors. They want greater access to mortgage credit created by “high quality assets” in a pool that banks will manage. These pools would rotate active mortgage securities. If a security were to become delinquent, it would be conveniently removed from the investment banking pool in a magic mojo shell game. “Newly issued covered bonds backed by high quality mortgage loans and issued by strong financial institutions may find a growing investor base in the United States.” Imagine that. Guarantee securitized bonds to make them desirable and they (the investors) will come in droves.

As if the United States and the world haven’t had enough banking innovation straight to economic disaster after years of abuse, the Federal Reserve is looking for new magic mojo banking prowess to bail out the world. They are thoroughly “unrepentant” of the past because there are no longer any ethics or morals in finance and banking. Bankers say, if we’d just done it a little differently, we would have succeeded.

This is all okay with Kevin and the Fed team because of “high quality” and properly understood financial innovation. The Federal Reserve seeks to encourage new and innovative sources of funding to secure its latest big mojo idea. Get ready for a brave new world of investment using a ball and golden shells on a table. You are sure to win the game over the bank, especially since they print the money anyway.

Who is going to guarantee the casino madness? Do you think the Fed is going to stand up as the guarantor on this one? ~ E. Manning

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