Busted: Bankers and The Global Economy

April 16, 2010

Video: Holding Wall Street Accountable

President Obama is selling the strongest consumer protections ever, bringing transparency to financial dealings. He suggests closing loopholes to stop recklessness and irresponsibility and to hold Wall Street accountable while giving shareholders new power in the financial system. President Obama lays out what Wall Street Reform is about, and questions whether opposition from the Senate Republican Leader might have something to do with his recent meeting with Wall Street executives.

October 1, 2008

Economic Bailout Drumbeat: Securities, Transparency & Housing Value

The White House, Treasury Secretary Henry Paulson, Congressional leaders coupled with candidates McCain and Obama, kept up a steady drumbeat of support for the ultimate bailout plan that has yet to materialize. For the moment, the U.S. political perception is that the world markets are stabilized. The reality is that on the surface, stability is a mirror on the pond of finance. Economists discuss among themselves that the reality of life in America remains that the nation is living way beyond its means. Political ideology in the States coupled with irresponsible spending has brought the nation to its knees. Generally, economists long for a pragmatic economic policy that is not driven solely by politics and special interests. An enlightened public is necessary to drive true reform to force politicians to do what they should.

Cutting bankers some slack by buying their bad securities is a bad idea. Is this not like overpricing the junk in your basement to resale as new? Garage sale junk rarely goes up in value. Depending on failed securities to magically increase in value when they are currently worthless is self-deception. Expecting financial junk to appreciate in value when there is no market for it because the premise of that junk is fatally flawed is no less deceptive. Failed banking securities are not wine.

The technical aspects of buying out bad securities is equally problematic. What is worse, depending on Congressional oversight to save the world is an exercise in futility. The lack of “transparency” is the chief issue behind the entire process. There is still no transparency in the process. Designing that transparency on many levels is probably mythical. Nobody within the brightest barrel of economists truly knows how to accomplish this transparency, but readily admit that the possible solution is highly technical.

The basis of the last several decades of wealth creation has been based on the foundation that housing prices could only increase. If U.S. economists had spent any time looking at Japan, most of us  would know the likelihood of truth. A few of us do. Since the crash of the 90s, housing prices in Japan have continued to move downward with no prospect of increase. Real estate is no longer the quality investment that it was in Japan and this nation is looking at the same scenario. ~ E. Manning

September 25, 2008

U.S. Political Infighting Threatens Bailout

rushing to "secret meeting"

rushing to secret meeting

Tempers are aflair in Washington on the eve of what authorities hoped would be the salvation of Wall Street and the U.S. economy. What Democrats declared as a breakthrough Wednesday evening seems a bust. The nation was led to believe that agreement had been reached and the Federal Reserve and the U.S. Treasury could begin the work of applying the agreement. Negotiations toward a massive bailout for Wall Street has just fallen into disarray on after Democrats said they learned in a White House meeting that presidential candidate Senator John McCain is backing a new plan differing markedly from one that has been under discussion. So much for bipartisan political agreement and cooperation that McCain advertised in the U.S. bailout.

Now, the feeling is that a new plan could be another week in the making as Republicans retired to an unknown location to plow through their ideas for the bailout. The Republican plan may involve a mortgage insurance plan as an alternative to the Bush plan, which has encountered criticism on Capitol Hill. Republicans also argued that the Treasury Department should charge premiums to holders of securities to finance the insurance.

Until Thursday’s White House meeting, Republicans had not brought up an alternative plan for the Wall Street bailout, including during previous meetings and Senate hearings. Is this political grandstanding or a far better concept? What does this mean, if anything, for the nation? If a negative catastophic reaction occurs will U.S. citizens hold Republicans responsible for the result? This portends to be a big stakes gamble for McCain which could catapult him to great heights or destroy his chances at winning the presidency. Only time will tell whether what Republicans are doing is a boon or a bust as some U.S. politicians seem to have forgotten that global confidence is more important to sustain the ailing U.S. economy than the opinions of the U.S. taxpayer. This reality isn’t opinion, but fact.

Meanwhile, the global central bankers of the G8 continue to dump dollars to encourage global dollar liquidity, thus increasing the pitch of inflation and further devaluing the dollar between the dollar and other currencies as the U.S. becomes indebted to foreign central bankers through the Federal Reserve. The dollar has less buying power and increased pressure toward inflated pricing across the board. The dollar is overheating, which will easily evolve into hyperinflation along with pressures that would force the Fed to admit the truth of that inflation. Even though central bankers are essentially holding a gun to the head of the U.S. national economy, they can’t seem to stop themselves in the name of dollar liquidity. In the end, foreign central bankers don’t want to be stuck with devalued dollars anyway. The International Society of Bankers are looking at global monetary policy and their own corporate profits.

Global reaction to a bailout is not very positive overall as the U.S. economy remains on life support. The German Finance Minister reacted, “The United States will lose its superpower status in the world financial system.” How the world reacts as the morning and day wears on in Europe and Asia remains to be seen. Ultimately, outside global and sovereign financing is what the U.S. economy is dependent on. How the world reacts is of great importance.

~ E. Manning

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