Busted: Bankers and The Global Economy

November 8, 2008

Where has inflation gone?

inflationary-dollarFor those that are wondering where all the inflation-talk has gone, look no farther than the back-burner economic news articles. In fact, Dallas Federal Reserve President Richard Fisher says that inflationary forces have vaporized. Don’t you believe it. Right now, the only concern is for the hope of stability and authorities are bent on that match. The economy is so depressed coupled with global recession that the immediate inflationary pressures have moderated. Other than housing prices, do you see any real pricing changes? Are prices down at all? America still has inflation, but hyperinflationary pressures have cooled.

securityWages are down. The middle class and below is suffering. America has stagflation, a nasty mix of inflation and a stagnant economy. What’s more, any measure of heightened inflation in the future isn’t being discussed with the idea that if we don’t talk about it, inflation won’t happen. The United States faces the same plight as Japan did in the 1990’s. However, right now, the U.S. dollar is not deflated in comparison with other benchmark currencies because of the global span of the crisis. Mr. Fisher says the dollar isn’t deflated, but admits that we will see “headline inflation.” Every measure taken in an effort to insure economic stability is destined to propel inflation to new heights. That isn’t now, so who cares as long as we can cool the heat now. This detracts from the idea that the United States has a major national security issue. ~ E. Manning

September 10, 2008

Is U.S. Mortgage Banking a House of Cards?

U.S. Senator Richard Shelby testified that U.S. Treasury officials found Fannie Mae and Freddie Mac were “playing games with their accounting'” to meet reserve requirements. This virtually guaranteed that the federal government would seize control of the government-backed companies once a comprehensive plan was developed. “Once they got someone looking closely at Fannie and Freddie’s books, they realized there just wasn’t adequate capital there.”

Digital Economy has held that accounting games are very common within the banking and mortgage industry. Public proof of this facts regarding predatory loans, highly questionable and illegal actions across the board relating to mortgage loans and instruments. The nation has learned that bankers cannot be trusted and yet little has been done to persuade the industry to stay away from graft and corruption.

What is worse with Fannie and Freddie, nothing is being done to those that falsified information and documentation because those actions are “legal.” In fact, the federal government has changed nothing beyond eliminating the upper crust of management. They still intend to involve themselves in the dangerous business of selling mortgage bond securities without considering previous consequences that has brought the nation to its knees. The unprofessional and dishonest conduct is considered as business as usual.

Fannie Mae and Freddie Mac have been a house of cards for years. Corruption and mismanagement within the organizations has been overlooked and rubber stamped in the name of protecting the economy and reputations. FHFA Director James Lockhart had declared Fannie and Freddie as fit just before the U.S. Treasury hired Morgan Stanley. Morgan Stanley has decided that the accounting tricks were legal, but simply allowed the mortgage twins to overstate their reserves.

Richard Fisher of the Dallas Federal Reserve noted that the capital held by the government-backed institutions was “of poor quality.” Where is the national outrage? When are spineless accountants going to stand up for right instead of creating new ways to cheat the system? Who is responsible and accountable for the corporate abuse of taxpayer money and developing methods that resulted in the unraveling of the economy for the short-term profit of a system of investors and mortgage bankers? Not a soul except for you. You are the taxpayer. You are on the hook, enslaved by the greed, incompetence and spinelessness of the people within “the system.”

This writer came from this culture and because of the abuse and attitudes in the system, retired from it. Instead ivy leaguers and young boss-pleasers without regard for balanced or honest accounting simply follow the rules put out by “mysterious forces.” If 911, overzealous government surveillance and the price of fuel is a national security issue, surely this abuse trumps them all. The tragedy is that you don’t really care. ~ E. Manning

August 19, 2008

All Quiet on the Western Front

Overall the news has been moderate with folks talking on and off about recovery sometime next year. Earlier in the day, the scuttlebutt was about recession concerns and corporate defaults, but later in the day, that worry had faded compared to inflation fears. Fear is what we have sold ourselves as the bankroll of greed and carelessness. Banks think that they have managed their resources well as they have cut back and are watching for corporate defaults as several prime economies continue to decline. Authorities are quiet, waiting for the next shoe to drop with inflationary and recessionary pressures.

The only man with a soul in the Federal Reserve, Richard Fisher, has been complaining about the refusal of the Federal Reserve to do anything meaningful about inflation. He proclaims food and oil prices have “overshot” on the upside, and that the Fed cannot afford to “gamble away” its credibility by failing to act against inflation. Strangely, based on what overseas influence says, the Fed has already done just that based on talk from as long as a few months ago. The Fed has no credibility. However, the Fed’s credibility is a symptom of banking abuse, by now a tired haggard topic. Raising interest rates is all the Fed can really suggest to combat inflation. Intelligent people know that Fed interest rates have little to do with inflation or recessionary recovery. Maintaining a viable economy is the key. Politicians have forgot that.

The Federal Reserve is in disagreement about what they can do to stem the tide of increasing and debilitating inflation. A few say that tightening the credit market is the answer. Inflation is double the Fed’s underestimated estimates and expectations. That reality isn’t much different than Europe. Inflation is a symptom of a lack of economic viability. The U.S. economy and global economy is rife with overprinted devalued greenbacks much like a cancer. Authority is focused on economic keys instead of allowing the individual to prosper.

Central bankers and economists really don’t know what to do about inflation, much less admit the real severity against global economies. The reality is that once a downward cycle begins, quietly waiting is the single best thing that can be done as the correction made by peoples and businesses in the economy adjust to the current economic reality. There is no disgrace in recovery for that is exactly what we want. A return to what brought the U.S. and the U.K. to the current recession is exactly what we don’t need. Bankers need to be bent over and heavily spanked for they are the ones that have precipitated the crisis we are dealing with aside from the fact that the country has lost its’ soul where independent job creation is concerned. The problem has become systemic because of the insistence on the U.S. government on crippling personal control.

The reality is that bankers have a huge advantage with the fractional reserve. The are able to loan out 90% of everything they have on the books over and over. In that regard, the banker’s ability to make money would seem almost limitless, but that isn’t enough for them. Instead, they have developed creative banking instruments like CDOs, designed to catapult profits into the stratosphere. Bankers abused the mortgage marketplace for predatory and creative profit, selling off loan securities to investors. That was unsustainable and dangerous. Instead of doing what bankers do best, the boring hum-drum of bean counting with interest and closely judging and rating those they loan to, they have involved themselves in gross speculation. Unfounded speculation is the debacle and outlook that the world has been hesitant to stop because of the temporary glory of profit. We have become a nation, even a world of shiftless gamblers with an aversion to hard work of any kind.

Everyone is worried because, as Standard and Poor’s says, “lots of damage has been done”. This economist says that if we are willing to learn from mistakes without repeating them, something real and meaningful has been accomplished. Those bankers that have involved themselves intentionally in criminal activities will be taken care by federal authorities, but most banking institutions will seek to buy off the authorities while passing off blame to certain internal authorities as scapegoats.

Since Congress closed for vacation, the U.S. has been in a waiting frame-of-mind with little to do. Everyone is in limbo waiting for a handout instead of getting to the business of life building. There is nobody to petition or to manipulate, the favorite pastime of America. All is quiet on the western front. The war against inflation and the economic roller coaster ride isn’t over yet. We are just now breaching the top of a rather large decline. Have we learned that life is not just an intellectual pursuit?

~ E. Manning

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