Busted: Bankers and The Global Economy

October 9, 2010

World economy breaking with US

As the US economy teeters on the edge of decline and a double dip recession, emerging economies continue to grow at a fast pace, fueled by multinational corporations. This changing global economy reveals a United States that is not the center of the economic world.

Financial leaders have joined hands to decide how to boost the global economy at the annual IMF and World Bank meeting. A number of these financial leaders suggest a break up, what is known as a “de-coupling”, in the wings for a number of years, but gaining traction as the US economy stagnates. Central bankers, along with complicit US politicians, have rode the US horse into the ground and now have their eyes on the next rising star to enhance their prosperity. Most politicians advertise that the US will live forever, even though powerhouse nations through history have ebbed like the tidal flow.

The world is breaking away from the US as the consumer of last resort,” said analyst Edward Harrison, the founder of CreditWriteDowns.com. “You’ll see a lot more importance in China, in Russia.” Corporate multinationals and US politicians have raided the US economy over the last thirty years and put that stock in other economies like China, Brazil, Russia and India in the name of globalism. The view is that growth in the global economy will be much more dependent upon these countries than on the “developed economies.” Whether this is true or not remains to be seen.

Meanwhile, the US continues to run by idiot lawmakers that are afraid of multinational corporate power or are having their pockets lined behind the scenes. Like the old Roman Empire, the US seems bent on its’ own self-destruction to salve the interests of a few “leaders of men.”

September 8, 2008

Billions Lost: Bailing Out U.S. Mortgages

The Freddie Mac and Fannie Mae bailout has effectively destroyed the paper value of all investments in those institutions, effectively cleaning the slate in a modified sort of bankruptcy for the mortgage twins as the federal government steps in. Billions of dollars have been lost by the banking community that was invested through common and preferred stock. The mouthpiece and supporter of the federal government, the Federal Reserve, points out hopefully that only some smaller banking institutions have stock holdings that threaten their existence.

With that in mind, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision are prepared to work with these institutions to develop capital-restoration plans to keep the system operating. The Federal Reserve will buy the stock holdings at fair market value before the bail out. The banks holding the stock must report holdings as available for sale and deducted from bank capital to complete the bailout.

In the minds of politicians and bankers, due diligence has been done. However, confidence will likely be shaken on many levels and a stock market effect is likely to be seen in a big way tomorrow as the economy adjusts to the new emotional and fiscal reality. How to restore confidence?

To make the boo-boo all better the Federal Reserve and Ben Bernanke has stepped up to the financial altar to make the following statement:

“I strongly endorse both the decision by FHFA Director Lockhart to place Fannie Mae and Freddie Mac into conservatorship and the actions taken by Treasury Secretary Paulson to ensure the financial soundness of those two companies. These necessary steps will help to strengthen the U.S. housing market and promote stability in our financial markets. I also welcome the introduction of the Treasury’s new purchase facility for mortgage-backed securities, which will provide critical support for mortgage markets in this period of unusual credit-market uncertainty.”

The appearance is that the “Treasury’s new purchase facility” will be through the Federal Reserve. Whether that is the ultimate truth or not, the Federal Reserve will finance it because the United States doesn’t have the cash or credit for the bailout. The federal government is bailing out Fannie Mae and Freddie Mac as well as the bankers that have invested. The taxpayer is securing all the debt for the bailout which has been predicted to run up as high as $65 billion. That is likely a conservative figure to bail out the entire mortgage and banking system. Authorities claim that the U.S. taxpayer will profit from the move. The word profit can be used in a number of ways. Doubtless, the American taxpayer will profit in regards to the current status quo. The public will be much more comfortable with the lastest plans versus total collapse of the economy because of a failed banking system. The future success of the nation depends on the future success of Fannie Mae and Freddie Mac. Too bad they didn’t see fit to rename the companies with a clean sweep, but perhaps that move was considered as too bold. 

The interesting truth is that a temporary effect of the bailout is likely to be instability rather than stability based on the old demon of fear and lack of confidence. Later today we will discover the pulse of the nation. ~ 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

July 2, 2008

Welcome to the “Slow-Motion” Recession

“It’s a slow-motion recession,” said Ethan Harris, chief United States economist for Lehman Brothers. “In a normal recession, things kind of collapse and get so weak that you have nowhere to go but up. But we’re not getting the classic two or three negative quarters. Instead, we’re expecting two years of sub-par growth. Growth that’s not enough to generate jobs. It’s kind of a chronic rather than an acute pain.” Harris should have some idea as his company is a major player as part of the problem as an investment banker. Yep, things have “kind of collapsed.” Conditions are making honest men out of economists. Pervasive weakness is a more accurate concept.

The European Union bankers have a more apocalyptic take on what to expect here (more…)

June 21, 2008

Slow Growth to Tame Inflation

Inflation is on the rise around the world, even more so than is being commonly reported by government agencies and central bankers. The finger of blame usually falls on two fronts. “World events cause inflation.” “Politicians cause inflation.” What most world citizens and media pundits alike fail to recognize is that central bankers are a principle cause for inflation.

In Britain, politicians claim a 60% price rise in food commodities, an 80% increase in oil and a 160% surge in the wholesale price of gas. As the while, the political powers claim that inflation is still close to their 2% target. What baulderdash!

The British bankers claim that (more…)

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