Busted: Bankers and The Global Economy

June 15, 2011

US economist predicts economic storm in 2013

devalued dollarA “perfect storm” of fiscal woes in the United States, a slowdown in China, the debt crisis in Europe and stagnation in Japan has a decent chance of damaging the global economy by 2013, Roubini told reporters late last week. Even so, he is being quite conservative about it. A 33% chance doesn’t seem like news to me. All this by New York University professor Nouriel Roubini, who correctly predicted the global economic crisis in 2008.

According to Mr. Roubini, the world economy expansion may slow in the second half of this year as “the deleveraging process continues, fiscal stimulus is withdrawn and confidence ebbs.”  To me, this seems obvious. This process is really part of what is already happening. It’s not news. The job market stinks in the U.S. and other modern nations. Money isn’t being made abundantly in the real economy. It’s all on Wall Street and in the investment world, based on heavy borrowing and debt restructuring of nations based on fiat money. Washington has been unwilling to deal with a one-trillion-plus budget deficit and a distinct bond market revolt is in the wings. Investors are waking up to the danger to their investment as US bonds are in danger of becoming junk. This will create higher interest rates and possible hyperinflation, which will remove any possibility of a recovery, even resulting the destruction of the dollar for an international medium of exchange. The bankers aren’t truly bothered by this. Based on inside information, the bankers already have a plan in the wings that I have touched on previously. It’s all about marketing, presentation to them.

Already, we have riots in Greece, as they face the music regarding the bad debt that the nation and bankers have created. They claim that officials need to restructure the debt of Greece, Ireland and Portugal. Waiting too long will ultimately result in the disintegration of the euro zone stability, experts say. Roubini agrees. The ridiculous aspect to the entire scenario is that all banking debt in the current system that is created will never be paid back. Further, much of this debt has been cleverly folded into Wall Street investments with the idea of making money, either through long or short selling. But this does not solve the problem of any debt unless the nations involved have the ability to make money by having control. They don’t. Only the bankers make money on any debt. In the meantime, these nations are paying on interest, not on principal. It’s stupid. The spiral never ends. Roubini and most economists remain silent on this aspect of the system.

Many other analysts, like myself,  have repeatedly warned of a “possible” repeat of the 2008 global economic meltdown in the immediate future. Others, like Moscow financial expert Alexander Osin expresses hope that the international community will be able to find the way out. Russian economist Konstantin Sonin  warns against overdramatizing the situation since people like Roubini are full of it, false prophets, in essence. The solution?

“The world economy faced such a problem in the 1930s,” Osin says, adding that Adolf Hitler’s ascent to power and the beginning of World War Two helped to resolve the problem. “At present, it should be solved by peaceful means, which the global community is almost certain to find.” Certainly, the Russians and Arabs are doing quite well since they are sitting on oil profits. That will only last as long as the current monetary gaming system does. That is the problem behind the whole matter. An eternal debt-based banking system destroys the nations that depend on it unless they are sitting on huge cash cow. Rest assured, that is temporary. If they are doing business with the bankers, the banking system will drain that wealth too. That is the nature of the system in place, as well as the nature of the future system.

So, to solve the problem we need a global war and preferably another Hitler. In the meantime, resolving the monetary system crisis is all about “hope,” and now we are listening to Russians for economic advice. The global economy really is in trouble. There won’t be any gain without plenty of pain. Never mind the pain that so many are in now.

E. Manning

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December 31, 2010

2011: A New Year for Dogs & Ponies

It’s been a great year if you haven’t looked much at the world around you, but there is always potential, especially for Wall Street leveraging and central bankers. Since I’ve retired in earnest, I sometimes shut off the news because I’d rather think about something else. Perhaps you’ve been doing this too. If so, you may not for much longer. Scuttlebutt at the G20 has it that the dollar won’t be the darling of the world much longer. So what, you say! That kind of talk has been going on for years. Apparently, the G20 finance ministers have decided that on May 4, 2011 that the dollar will no longer be the “world reserve currency.” So what you say? Even if you don’t believe it, the scenario is rather entertaining, i.e., would make a great movie. It’s a real dog and pony show.

Even now silver and gold paper is highly leveraged, much like the dollar is with the fractional reserve. There is so much leveraged paper out there that the system in place is likely to implode from the panic. There isn’t enough silver and gold bullion in the marketplace, or rather, in the storehouses. This is already heating up into a potential crisis, a run on the bank, as it were. Won’t that make gold and silver more valuable? Only if you have your gold or silver in real gold or silver. In that case, you won’t have worthless paper securities, but a real danger of having your life taken from you if anyone knows you have it. Because of this, you won’t be able to spend it either, because if you did, somebody would know you had it.

As I said, the demand for the real gold and silver will be terrific as the former world reserve currency plunges into oblivion. Either singular scenario means hyperinflation. With OPEC oil being the USA major import, the nation will shut down from lack of fuel or rather, the ability to buy it. The nation has an oil reserve, but that won’t last long the way America consumes it. Too bad we can’t leverage the oil reserve to pretend there’s more. I’m not finished yet.

The Fed has initiated Quantitative Easing (known as QE2) that spells an end to the Bretton Woods accord with the idea of replacing it with a different system. Trading partners are nervous, but they aren’t the only ones. For now, export-dependent nations recycle capital to USA markets in order to sustain demand. The Federal Reserve decided that the only way to fight deflation and high unemployment in the USA was by weakening the dollar to make USA exports more competitive. That means that the USA will be battling for the same export market as the rest of the world, which will shrink global demand for goods and services. Never mind that China’s decision to back off on the dollar would be enough to cause a dollar crisis. Never mind that the multinationals will hate this as profits plunge. Government officials will wet their pants in panic. Number of jobless Americans will go through the roof, if we had one. Wal-Mart, so dependent on China exports will close. Inventories will be short. National GDPs will shrink. Economies will contract. Ooh. It’s not pretty.

Paul Volcker recently opined: “The growing sense around much of the world is that we have lost both relative economic strength and more important, we have lost a coherent successful governing model to be emulated by the rest of the world. Instead, we’re faced with broken financial markets, underperformance of our economy and a fractious political climate…” Everyone has rode the pony too hard. Now the powers that be are preparing to run the show in a way that is untested. We aren’t sure whether the dogs can carry the weight. All those “risk-free” treasury bonds are in real danger. The whole system is bankrupt. The USA stands to lose all its status. Central bankers know this, but they already hold all the valuables, and the means for a new system.

The world doesn’t care about the USA deficit, as long as it’s used to bail out the world in some sense. 100 major cities are facing bankruptcy this year unless they get a federal bailout. Even though Great Britain opted for austerity measures, the USA doesn’t really have this for a choice because they hold the debt bag for the global standard. Central bankers have the valuables and the credit to prolong the current system as they please or not. Meanwhile, Main Street and the population is more tightly squeezed than ever. Those trained dogs are walking a tightrope, but for how long? President Obama needs to hold everything together with a grand distraction so that he will be handily re-elected. What do you think that will be? It’s sure to be glorious.

In the meantime, go ahead and shut off your TV until something better comes along. Have a party while you can. You might not have long to wait.

December 22, 2010

Federal Reserve Contributed to Economic Crash

Filed under: banking, central bank, economy, federal reserve — Tags: , , , , , , , — digitaleconomy @ 1:19 pm

Back in early 2005, President George Bush excitedly told the nation how great the country was doing. Behind the scenes was another matter.  The housing market was overheated. Economic danger signs were in the air. The Fed had an opportunity to reduce the risk among banks, notably smaller ones. The Federal Reserve Board is also guilty of regulatory inaction that directed contributed to the mortgage meltdown.

The leadership of the Federal Reserve rejected advice from one of the nation’s top banking regulators, a professional accounting board and the Fed’s own staff for restrictions on commercial bankers use of special debt securities to raise capital. The exponential growth and lack of tracking ability for these securities threatened the fabric of banking operations.

Chairman Alan Greenspan and the other six Fed governors voted unanimously to reaffirm a nine-year-old rule allowing liberal use of what are called trust-preferred securities. Previous to that time community banks had few ways to raise capital without issuing more common stock and diluting share price. The Fed allowed the banks to count the securities as debt that they could loan against, even while counting the proceeds as reserves. Through the fractional reserve, banks were then free to borrow and lend in amounts 10 times or more than the value of the securities being issued. This kind of leveraging became the norm. The Fed enabled Wall Street bankers to encourage community banks to take on huge debt and to plunge the borrowings into real estate loans.

Institutions relying on these instruments took more risks and failed more often than those that did not include the use of these trust-preferred securities. Investment banks on Wall Street aggressively pooled these community-bank securities into complex bonds, much like the complex mortgage bonds that nearly brought down the financial system in 2008.

The consequences have continued to build for small bankers. More and more banks are defaulting, requiring intervention by the FDIC. The bank failures have already left more than $1 billion of the complex bonds on the books of the FDIC bank rescue fund.

The Securities and Exchange Commission is now investigating how securities firms promoted the sale of these complex bonds in a poorly understood,  billion dollar offshore market for debt issued by banks, insurers and real estate trusts without checking their greed. Everyone was making money and delighted by the results. As the market became saturated, bankers refused to conduct business, becoming sitting ducks in a frozen banking system. Eventually, in October 2008, the system faced a complete collapse.

McClatchy Newspapers Article

FDIC report

Fed’s mysterious policy: How do we know if it’s working?

September 25, 2010

Ralph Nader Debunks Free Market Economy

Filed under: banking, business, corporatism, economy — Tags: , , , , , , , , , — digitaleconomy @ 3:00 am

Ralph Nader speaks in Stockholm, Sweden, where he debunks the myth of the free market.

August 7, 2010

Dollar Deflation & the Grave Economy

Dark economic clouds are gathering over the United States as a second stage of national distraction arrives. Now that the BP disaster is over with, a new topic of angst is needed. Right on cue, the Federal Reserve and Ben Bernanke are considering the economic pains of their patient while looking after their own corporate bottom line and the continued enrichment of international bankers.

Bernanke warned in a speech eight years ago that “sustained deflation can be highly destructive to a modern economy” by leading  to a slow death from a rising real burden of debt. “Sufficient injections of money will ultimately always reverse a deflation,” claimed Bernanke.

New banking assessment by big commercial banking interests (Barclays, RBS, et al.) outside the U.S. show that the dollar is in a corner. Wedged tighter in that corner is the United States, which is now wholly dependent on the banking debt that continues to strip the nation. Uncle Ben and his international banking buddies are facing deflationary pressures as economic pressures fueled by rampant unemployment. Their perfect answer will be to start up the printing presses and to flood the international market with still more dollars, which I must admit will only fuel the fire of deflation.

One answer is to create another crisis with competing currencies. The Euro is a perfect candidate for more distraction, while international bankers continue to drain European and Asians nations of their wealth wherever possible. The Wall Street expansion into Europe and Asia has created still more opportunities to distract from dollar reality. Believe it or not, there are still more precious resources to drain. Multinational corporations are now in the cross hairs.

President Obama doesn’t really enter the equation. Perhaps he will once again arise to take “full responsibility” as he did in the BP debacle. No matter. The Washington lawmakers that create brilliant policy don’t matter, except to approve the imaginary creation of still more greenbacks, ringing their hands in political pretense as they hold out their hands for kickbacks and such. All of these cronies are mere cosmetic agents as international bankers continue the next phase of their rape and pillage policy. Bernanke is preparing to start with massive quantitative easing.

The warfare manual for international bankers says to print more dollars. They haven’t hit their 5 trillion dollar target yet. That is their goal. To completely denude the resources and capital of nations so that they can create their own nation that officially rules over all nations. They have the nations and banking community. They now seek the sustenance of the corporate oligarchy. Wall Street is simply a vehicle to bring this about. They seek ultimate power while pretending to be obsequious and eager to please. The idea is to bring the current system to its knees. Even though we have been conned by phoney money, they hold almost all of the real resources of value. We think the debt is real and have traded all manner of resources and labor for it.

Meanwhile, economic contraction is in the wings for the United States. The leading indicator per the Economic Cycle Research Institute is falling faster than since World War II. CPB Netherlands shows real issues with world trade. There is plenty more behind the scenes that shows a truly grave problem for thinking inside the box. Prepare for the unthinkable.

July 31, 2010

SEC Lets Citi Execs Go Free After $40 Billion Subprime Lie

The following news analysis was written by AlterNet.org’s economics editor Zach Carter.

What is the penalty for bankers who tell $40 billion lies? Somewhere between nothing and a rounding-error on your bonus.

The SEC just hit two Citigroup executives with fines for concealing $40 billion in subprime mortgage debt from investors back in 2007. The biggest fine is going to Citi CFO Gary Crittenden, who will pay $100,000 to settle allegations that he screwed over his own investors. The year of the alleged wrongdoing, Crittenden took home $19.4 million. That’s right. Crittenden will lose one-half of one percent of his income from the year he hid a quagmire of bailout-inducing insanity from his own investors. That’s it. No indictment. No prison time. Crittenden doesn’t even have to formally acknowledge any wrongdoing.

In 2007, as financial markets were freaking out about the subprime situation, Citi repeatedly told its investors that it owned just $13 billion in subprime mortgage debt. It was true – if you didn’t count an additional $40 billion in subprime debt that the company was also holding onto.

Citi’s CEO at the time, Chuck Prince, has not been charged with anything. As Yves Smith emphasizes, all of the top financial officers of every major corporation are responsible for the accuracy of their quarterly financial statements. Lying on those statements is a federal crime. This is the sort of thing that securities fraud cases are built around.

The SEC’s own statements about what went on at Citi are damning. If the agency can make this kind of information public, they ought to be pursuing criminal prosecutions. The SEC says that senior Citi management had been collecting information about the company’s subprime situation as early as April 2007, but repeatedly cited the $13 billion figure to investors over the next six months, waiting to acknowledge the additional $40 billion in subprime debt until November 2007. The SEC also says that Crittenden knew the “full extent” of Citi’s subprime situation by September at the latest, but the company continued to cite $13 billion in earnings reports through October.

Citi’s subprime shenanigans had consequences for taxpayers, pushing the company to the brink of total collapse and prompting one of the biggest bailouts of 2008.

Phil Angelides and the Financial Crisis Inquiry Commission deserve a lot of credit for highlighting the absurdity of Citi’s actions in a hearing on April 7 of this year (the key passage starts on page 368 of this pdf transcript). Angelides’ line of questioning revealed that even Citi’s board knew that the subprime exposure was much greater than what the company was claiming in public. Citi’s board at the time included Robert Rubin, former Treasury Secretary and architect of much of the deregulation that lead to the current crisis who took home $120 million for his work at Citi.

Either the SEC or the Justice Department could be pursuing criminal cases against Citi executives. What does it take to get the Justice Department’s attention on a financial fraud case? You have to launder $380 billion in drug money, and even then, DOJ lets you off with a slap on the wrist. The DOJ caught Wachovia doing just that, and the bank is getting off with a minor fine that won’t even make a dent in it’s second-quarter profits.

The Citi settlement is worse than a get-out-of-jail free card for Crittenden, Prince and their cohorts. The SEC actually fined Citi’s shareholders $75 million for the alleged wrongdoing of their executives. For some varieties of corporate misconduct, like Wachovia’s drug money laundering, hitting shareholders with the fine is appropriate. Wachovia’s money laundering operations directly enriched the company and its shareholders. This was not the case with Citi’s subprime scandal. Citi’s executives were hurting their own shareholders. Instead of meting out serious punishment to those executives, the SEC is fining Citi’s shareholders, the very people wronged in the incident.

This deference to the elites who wrecked the economy just keeps playing out. When Bank of America lied to its shareholders about billions of dollars in bonus payments it was about to make, the SEC decided to fine BofA shareholders and let the firm’s executives off the hook. The decision-makers at Wachovia, who allowed the firm to funnel drug money despite repeated warnings by whistleblowers, have not been indicted. Nobody at Washington Mutual has been indicted despite clear evidence of rampant mortgage fraud at the firm. Lehman Brothers’ repo 105 accounting scam is going unpunished, as are similar schemes at other banks including Bank of America. After much public relations flogging, the SEC let Goldman Sachs off easy.

More than 1,100 bankers went to jail in the aftermath of the savings and loan crisis. Massive financial crises simply do not occur without widespread fraud. The failure to prosecute that fraud poses systemic risks for the global economy. With too-big-to-fail behemoths dominating the financial landscape, the prospect of prison is the only serious check on executives interested in cannibalizing the economy for personal gain. If the SEC and the Department of Justice continue to let executives get away with outrageous acts without even taking the case to court, our financial system is doomed to repeat the same excesses and abuses we’ve seen over the past decade. If Crittenden did what the SEC claims he did, he screwed over his own investors and scored a huge bonus in the process. Everybody on Wall Street understands the implications: breaking the law is a great way to make a lot of money. When a class of elites can thumb its nose at the law with impunity, the result is not only a threat to the efficiency of our economy, but a threat to the basic functioning of our democracy.

You can read Mr. Carter’s news analysis in context here: blogs.alternet.org/speakeasy/2010/07/30/where-are-the-prosecutions-sec-lets-citi-execs-go-free-after-40-billion-subprime-lie/ Mr. Carter is a fellow at Campaign for America’s Future, and a frequent contributed to The Nation magazine.

July 26, 2010

Plague of Home Foreclosures in U.S. Continues

The miraculous recovery that has been proffered by the Banking Elite hasn’t happened. Central Bankers and Wall Street profiteers believed that they could continue to operate with wild speculation while reaping the results and encouraging more of the same. The financial wizards have not proved their financial literacy. Their speculative downfall started with bundling speculative instruments tied to U.S. housing debt that never should have happened to begin with. Hundreds of thousands, maybe millions, of Americans bought homes that never really qualified. The hot market was bolstered until the superheated financial bubble burst, leaving a worldwide recession based on what amounts to Wall Street gambling on highly leveraged contracts that have bankrupted the system. The reality is that the problem isn’t with foreclosures themselves, but with the bundled securities and expected profits that are tied to the failing mortgages. No doubt, these securities have been packaged and sold dozens of times even though they are worth nothing now.

More than three years into a U.S. housing crisis that started a worldwide recession, home foreclosures continue to further the devaluation of the U.S. economy. The waves of foreclosures no longer come from sub-prime loans that have defaulted. Foreclosures come from formerly respectable borrowers that have lost their jobs in an impoverished and drained economy that no functions to support a nation of hard-working Americans, but functions only to serve the Banking Elite.

In the first half of 2010, more than 1.6 million U.S. properties are in the midst of foreclosure filings, which include bank repossessions, default notices and auction sale notices. This is an 8 percent increase from the first half of 2009 which puts the United States on target to reach 3 million filings this year. These numbers show the fragile state of housing and real estate investment, which has been decimated. Government programs have been ineffective at stopping the national hemorrhage. Little has changed except that more Americans are living in rentals, with friends and family, in tents or on the streets, depending on their financial fortunes.

The U.S. government and banking profiteers built a house of cards on the idea that the cost of housing would always rise and that the profits would never cease. After massive bailouts, they are still stuck without a financial course to chart and exploit, beyond tapping government bailouts. The Federal Reserve holds trillions in useless notes and obligations in the hope that someday they will be worth more than the paper they are printed on. The economy continues to spiral downward despite limited attempts by big money multinationals to bolster the market.

Corporate multinationals and banking bigshots aren’t here as charities. They demand to make money for shareholders. For decades they have profited from U.S. tax law and from the backs of manufacturing slaves in the third-world. Now they seek to hold the bottom line and to keep their organizations alive. Now they are cannibalizing inept governments to sustain themselves. Stagnation is preferable to loss as the United States becomes the new third-world in their great plan to level the national playing field through globalization. Welcome to the brave new world of globalism, where everyone is equal except for the corporate oligarchy.

It isn’t pretty, but is pretty much as advertised.

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