Busted: Bankers and The Global Economy

July 24, 2010

U.S. Worries Over Deflation

The nation has a nasty case of stagnation, fueled by significant employment issues and rising defaults. Prices are falling while most consumers resist buying. When deflation begins and prices fall, it seems like a good thing. Then, lower prices cut into business profits which results in trimming payrolls. This further undermines buying power, which leads to lower profits, fewer jobs and lower wages. All this results in economic contraction.

With all the cutbacks, buyers that have the funds wait for better deals through even lower prices, which magnifies deflation. As a result, the nation plunges into a downward economic spiral that is hard to escape. This is exactly what the United States faces.

The nation’s capital is feeling the guilt as they look at other in dismay about the rising deficit and inflation, even though they advertise to the world that inflation doesn’t exist here. Economists around the world see great potential for deflation of the dollar, which already would be the case, were it not for declining currencies across the globe.

The statistics say it all. Consumer prices have declined each month for the last three months, putting inflation above last year. They claim that the core inflation rate is at a 44 year low at less than one percent. So why are they worried? The Federal Reserve likes to see an inflation rate of 3% because this puts more money in their corporate pockets.

Private economists and financial experts are more concerned. Some of them see the possibility of deflation at more than fifty percent. This is compounded by unemployment, lack of production and lower spending.

Should deflation occur, the central bank has the tools to reverse it according to Ben Bernanke, even though the Federal Reserve has interest rates at historical lows and has pumped trillions into the financial system. The books have been cooked baby, to the loss of the United States. Bernanke claims the U.S. economy is more vibrant and productive than Japan’s was in the 90s. The difference is supposed to be that Japan’s labor face was actually declining, while the States has plenty of labor.

In my words, there are plenty of financially-broken and impoverished Americans to take advantage of, with the hope of restoring the economy on their collective backs. Wall Street and multinationals aren’t suffering beyond the losses of jobs they incurred during the recession. Let’s face facts, they didn’t suffer much at all. Their employees did. That’s the way it is.

The little guy at the bottom, so far, is the one that has truly paid for the recession and the remainder of its fallout. They are ones that will continue to pay.

June 27, 2010

Jobs & G20: Budget Slashing Fever & Fantasy

To hear the G-20 proclaim it, the U.S. and other “prime economies” had better slash their budget deficits before the world comes to an end. The U.S. Senate quashes continued aid for the unemployed. Wall Street investment firms and banking succeeds in watering down financial reform. The fantasy continues while economists and politicians worry behind the scenes.  Even VP Joe Biden openly admitted that the United States will not regain the jobs that were lost in the “Great Recession.”

The official jobless rate, projected at below 10%, is pure fiction and must treated as such by those that seek the truth. It doesn’t consider many unemployed people that have dropped off the charts into oblivion. Underemployment is a national plague that the Labor Bureau of Statistics has revealed. Many are the discouraged job seekers and those that have settled for part-time work. The U.S. Labor Department shows that there are 79 million men in America between the ages of 25 and 65. Nearly 18 million of them, a record 22%, are out of work. This doesn’t include the underemployed. The impact is larger in African-American men.

The financial markets, like the government lawmakers, could care less about the deficit. Perhaps they should. As a result, investment rates in bonds is down. Almost all of them ignore engineered inflation which pays off central bankers to the tune of about 10% yearly, the real loss in buying power for the nation. In the meantime, the official inflation rate is a “convenient” 3% most years. Powers that be project an inflation rate 2.3% yearly for the next 30 years. Dreamland. Because of what is really a stagflation economy, falling prices and deflation of the dollar are more likely.

Wall Street and multinational capitalism seems to be in robust condition, to the cost of everyone but them. Corporate profit margins have reached record levels at 36% as the average American is short circuited entirely. These profits have never been so high since record keeping began. These figures are much the same as they were in the Reagan administration.

More than half of the national budget funds defense (don’t forget the wars), national debt interest and Social Security/Medicare. Politicians are eyeballing cuts on the latter, often silent as a senior political voice fades away. Don’t kid yourself. You’ll pay for seniors and the disabled one way or the other. Don’t kid yourself about the other major expenses either. Meanwhile, the national budget has climbed steadily for decades in the 6% to 10% range, much higher than the professed inflation rate.

There are no easy answers beyond beginning to live within our means as a nation. For years, Americans had forgotten about this necessity, encouraged by the system to spend endlessly, until the recession hit us between the eyes. Only bankers, multinationals and Wall Street have profited in their own economic bubble. Government has forgotten what economic balance and locally productive jobs mean, threatening to destroy their own system of weights and balances with unfettered spending and wars overseas, designed to keep terrorist attacks overseas and out of America. We have created our own reality. Are we willing to change?

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

October 14, 2008

Is Inflation King Yet?

superpower confidence

superpower confidence

The media and the perception of confidence took a temporary nosedive after a banner day at the global superpower. There is so much going on, who can really know what is really driving the situation except perhaps confusion? The bottom line is that investors will continue to fret about the stock market and take profits while they can, even in a volatile market. That is human.

As part of the new building blocks in the national economy, the U.S. Treasury finally confirmed plans to use the initial $250 billion to invest in large banks and former investment banks with conditions. All but one bank took the federal government up on the offer. President Bush has requested another $100 billion for bailout aid as well as a move for the Federal Reserve to start buying up short-term debt from companies. Meanwhile, Henry Paulson has hired Mellon Bank of New York to assist the U.S. Treasury in buying failed mortgage securities or troubled assets.

As usual, the Federal Reserve’s main preoccupation is to manipulate public perception of interest rates and the classical perception of low inflation. Ben Bernanke is keenly interested in keeping national confidience in the hope of somehow strengthening the dollar and curbing the tide of what is proving to be nasty inflation in a time of wage stagnation. The Fed simultaneously manages interest rates while working to keep the economy from dropping into a recession. Uncle Ben has his work cut out for him, especially since we are probably already in a recession by his own definition. If he knows that, he isn’t saying. No surprise there. Besides, inflation is now a back door issue.

Uncle Ben has been busy on the dollar and liquidity front as well. Unknown trillions of dollars have been forced into the U.S. banking system in an effort to get banks moving again. Uncle Ben has been working with the help of central bankers around the globe to make this happen. So far, the efforts haven’t worked. One of the conditions on U.S. bailout funds for banks is that the money is used for loans instead of bank protection, which may begin to change the banking equation soon. Whether that condition works remains to be seen.

All this money flowing would appear to generate some positive and decisive activity. A nationally-recognized recession seems evident as Corporate America and Corporate Multinationals are starting to reap financial declines, further jeopardizing any chance at economic expansion and further withering job prospects. Huge injections of cash are generating one large problem that will come home with a vengeance given some time: a rather stiff inflation rate. The U.S. will soon wish for today’s inflation. But, we live in the real world, so we consider the price of food and fuel without faking the facts. Other issues like a high jobless rate coupled with that inflation will be still worse. Could stagflation be around the corner or are we already there? That depends on who you ask. ~ E. Manning

October 2, 2008

Bailout: And Now the Rest of the Story

And now the rest of the story. The U.S. Senate and House have approved and passed the latest U.S. bailout miracle. How will the nation benefit? The rest of the story is there will be very little difference except that the current power structure will remain in place. That, America is exactly what all the hubbub at the top of the U.S. government is all about. The long-term details are of little importance to politicians, bankers and especially not to the central bankers.

Within a month or two, Hank Paulson will buy $250 billion in junk assets using mainly guesswork since there is little transparency in evaluating the quality of what he is buying. Because of the false pride in U.S. government and under the pretense of fairness (can you believe that?), Paulson and his buddies will spend more than market value, even though the junk value is pretty much zero. If the nation is smart, they will elect a president that will promptly dump Henry Paulson onto the job market heap of life. He will spend up that precious $700 billion in credit before he leaves office. If by some miracle Paulson retains his job, he will come with his hand out to Congress for another hefty chunk with little to show for his efforts.

Confidence will improve modestly, mostly due to investment from global central banks as they need somewhere to invest all that devalued cash. Other foreign investors will watch cautiously, but begin to bet on safer risks for the short-haul. Banks will continue to stand on capital and credit markets will stay tight. The economy will continue to shrink and the market liquidity will continue to logjam.

Joe Citizen will continue to cut back because of inflationary pressures and shrinking income. Credit costs will rise and the cost of capital goods will stall. Pressures on foreign markets will continue to put the squeeze on the business world, especially big business and multinationals. Generally, the poor will get poorer and poverty will spike across the globe.

The global economy will continue to weaken focusing initially in Europe, followed by Asia and the emerging markets that business has come to rely on. This is in process now.

Hopes for a speedy recovery by politicians and lapdog economists will wane as the seeds of what Washington has sown come to full fruit. The unpleasant combination of high inflation and economic stagnation will come to bear on the land of the free, followed by the Europe and the rest of the world.
Continued meddling by the U.S. government, foreign governments and central bankers will continue to reinforce inflation. This meddling, like the bailout before it, will merely prolong the economic pain instead allowing the cycle to work naturally. Economic suffering will be great.

The U.S. government will vainly attempt a fiscal stimulus for taxpayers for give a shot in the arm to the economy. An expansion of the bailout will be too little, too late and with little understanding of the real issues because of a lack of understanding of the real issues. Economic recovery is a long-term prognosis.

The United States will be tempted to default on the national debt. Politicians won’t need to worry much. Central bankers have what they want: control of governments and populations, the economic gross national product to fund their quiet rush to superpower status and a new global currency built under the guise of peace and security. It is a dark scenario that must be walked through except for those central bankers that control the gold.~ E. Manning

September 24, 2008

Power: The Truths behind the Meltdown

massive bailout

massive bailout

Americans should feel some value in the fact that the FBI is now investigating toxic firms that have been central to the U.S. financial meltdown. For some time 26 firms have been under intense scrutiny by the FBI. The media has been highlighting investigation of the 4 firms that have collapsed: Fannie Mae, Freddie Mac, AIG and Lehman Brothers.

The mortgage twins, Fannie and Freddie, have already been under investigation for years based on varying problems with financial irregularities and leadership issues. The investigations will focus on the financial firms and the individuals that ran them. Hopefully, middle management will also be scrutinized and judged. The truth is that the FBI needs to find the perpetrators of the fraud rather than single out top dog scapegoats.

financial storm

financial storm

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke made the joint unilateral decision last week that the only way to stop the U.S. financial carnage was to deal with the root cause of all the troubles by rooting out billions of dollars of bad mortgage debt sitting on the books of major financial firms. This debt has triggered the worst credit crisis in decades, “causing” credit markets to freeze up despite the fact that the Fed joined with major central banks around the world to pump billions of dollars of reserves into the financial system. The billions of dollars pumped into the global economy are creating a crisis of stagflation themselves, a nasty round of inflation coupled with the current economic recession and malaise. The results of those actions cannot be undone and are being ignored by panicked authorities.

The reality behind the liquidity lock down that the Bush administration and U.S. Treasury Secretary are panicking about revolves around interbank lending, a problem that has been noticed publicly for at least a year. Why is there a problem? The crisis boils down to an issue of trust. Bankers know that they cannot trust one another and are unwilling to take the fall for the fraud of other bankers. In other words, the bankers know they have been harpooned by the securities that were supposed to make them wealthy. Bankers have put the thumbscrews on lending to protect their solvency.

selling Wall Street

selling Wall Street

The Bush adminstration has its game face on. President Bush says he expects Congress to pass “a robust plan” that deals with the nation’s economic problems. The word robust has become another favorite public watchword that should garner your prompt attention. Robust implies a broad emcompassing scope along with complex provisions that could very well be the downfall of any attempts to band-aid the current situation. Currently, an estimate is that 1 of 254 mortgages is actually in some measure of foreclosure. This is a very small percentage to cause a crisis. What the American press and government is acknowleging is merely the tip of the iceberg. The main problem with securitized loans is that when they were developed and created, a system was not developed to track reality. An internal processing scandal within the process of issuing of these securities is implied. However, government has not been eager to breach this area of the mortgage crisis beyond specifying that the regulations and concepts in the entire financial system are dated and ineffective. Somehow, this idea is supposed to get government, regulators and bankers off the hook.

taxpayer crisis

taxpayer crisis

What should be done to resolve the current foreclosure crisis? Not a soul has bothered to shift gears in addressing the real problem regarding predatory financing and usury in place. Each known problem loan triggered by payment issues needs to be evaluated regarding the current real value of the home. If evaluation of home value is an issue because of a weak market, then half the real value of home should be the mortgage value. This action would assist in correcting inflated home prices and counter price inflation. Any failure of the past verification process through bankers or qualification of the homeowner should be ignored as long as the homeowner is gainfully employed and can make the payments on the new loan. The government then needs to reissue a safe government-backed assumable loan that will allow the buyer to stay in the home at a low interest rate. Ultimately, the goal would be for every loan to be converted to a non-predatory government loan with low interest. Loans would not be securitized or bundled for resale as government securities. Banks would not bundle loans into any internal or banking instruments. Bankers would simply make money from compound interest and providing basic banking services. The bailout needs to be on the side of the taxpayer, the basis and stock of capital and wealth, rather than on the side of corporate interests that often pay few taxes in the real world beyond payroll.

losing the Dream

losing the Dream

If push came to shove, the nation would be better off giving mortgages away than bailing out the endless debt and failure created by Wall Street and the system in place. Americans would then own their homes fair and square with a new national beginning. Trillions in debt would be eliminated overnight. This idea seems radical and expensive, but is assuredly no more expensive than a long-term bailout of government and corporate fraud. The American population would benefit directly from the bailout, as should always be the case. The main problem is that such an action would destabilize the power structure in place. However, the ideas presented here are no less sane than what is being proposed by the Federal Reserve and the U.S. Treasury in the name of the Bush administration. We are a nation of double standards that bolsters government and corporate power at the expense of the populace, a fascist notion. That needs to change.

The FBI has been in various stages of investigation regarding the mortgage debacle since March of 2007, even before most Americans were aware of a scandal. This proves that the Bush administration has been aware of mortgage fraud and scandal before the nation began to see the sign in the summer of 2007. As far back as the summer of 2004, President Bush beamed with pride about the creativity of the banking and mortgage industry, the single force that had maintained the illusion of national prosperity during the last three political administrations, originating from the Clinton administration.

Where are the people that are being investigated and implicated in fraudulent activities? Is the FBI keeping tabs on the movements of those may be involved in the scandal? What Americans should be concerned about is whether the U.S. government is allowing people that are tied directly into these firms to leave the country if they haven’t left already. ~ E. Manning

September 22, 2008

Robbery from American Taxpayers

bailout or pork barrel?

bailout or pork barrel?

“It is a big package because it’s a big problem,” Bush told reporters at a news conference. “The risk of doing nothing far outweighs the risk of the package.” Yet, most Americans seems to be irritated, if not entirely incensed about the prospect of bailing out wealthy bankers and insurance companies along with buying up worthless securitized bonds built by greed and corruption. Do Americans seem to care, even though authorities say that the alternative is total economic devastation? Americans do care, but realize that what the Bush Administration intends to do is not without substantial risk. Even more important are the real moral principles involved in the bailout. Moral and ethical concerns is exactly what the Bush Administration, Republicans and the Congress have been bereft of during the last two terms of office. An undercurrent of seething rage foments in the underground of American souls.

Americans have focused most of their indignation on having to foot the bill for irresponsible lenders and borrowers. The fact that little benefit to the economy or decent jobs for the American people will result from the trillion dollar bailout doesn’t make the bitter pill easier to swallow. However, the fact that Main Street America will suffer has some Americans rethinking their position.

the legacy of Bush

the legacy of Bush

What Americans fail to realize is the economic devastation that will plague America regardless of a bailout. The U.S. economy is in a king-sized pickle with a stalled economy and poor prospects. Politicians and economists alike seem to have temporarily forgotten that bailout or not, stagflation is on the way, a difficult prospect that the panicked authorities have suddenly ignored in the interest of saving their immediate power. The trillion dollar economic bailout is not a miracle, just a different road down the same mountain of decline.

A few have suggested that the bailout is not a bailout. The government is not handing out cash and have advertised that they might actually stand to make a great deal of money out of this. The bottom line is that when the bad securitized bonds gain value, that value will trickle down to the American taxpayer. The big problem is that most Americans no longer believe in the lie of “trickle-down economics,” a political theory that seems to have been fully subverted by bad business practices, corrupt politics and even more incompetent regulators while Americans follow the rules. Furthermore, money doesn’t trickle down from government except through the welfare system. This make the prospect of “trickle down” even more unlikely and unpalatable. The taxpayer does not expect to see the money, but knows that the government will continue to spend with wild abandon. The national rage is palpable as American taxpayers are made to bail out the world. ~ E. Manning

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